Fore­cast­ing in Busi­ness and Eco­nom­ics

Course content

Accurate forecasting of future events and their outcomes is a crucial input into a successful business or economic planning process. Forecasting is used to answer important questions, such as: How much profit will the business make? How much demand will there be for a product or service? How much will it cost to produce the product or offer the service? How much money will the company need to borrow? When and how will borrowed funds be repaid? Businesses must understand and use forecasting in order to answer these important questions. This course provides an introduction to the application of various forecasting techniques.
This course aims to introduce quantitative methods and techniques for time series modeling, analysis, and forecasting. Emphasis will also be put on the applications in economic and business related areas. Computing is an integral part of this course, therefore all students are expected to do data analysis, modeling and forecasting with computer programming software.
The focus of the course is to use past data to predict the future. The key concept is that there is an underlying process that gives rise to the data. Using statistical properties of that process, we can develop forecasts. Forecasting methodology will be presented in a lecture format in the first part of each class meeting. The application, however, is the centerpiece of the presentation. In the second part of the class meeting, students will work on in-class applications. 
We will start with simple models that are widely used in business and progress to modern methods that are used by professional forecasters and economists. We will be studying basic components of time-series data, such as trend, seasonal, and cyclical components, as well as basic model specification techniques, such as moving average and auto regressions, used in the forecasting of time-series. 
All forecasting methods will be illustrated with detailed real world applications designed to mimic typical forecasting situations. The course uses applications not simply to illustrate the methods but also drive home an important lesson, the limitations of forecasting, by presenting truly realistic examples in which not everything works perfectly! Examples of the applications include, but not limited to, forecasting retail sales, hotel occupancy, fishery output, consumer loan requests, predicting expansion of fast food chain stores, modeling and forecasting macroeconomic activity indices such as Gross Domestic Product, unemployment and inflation, modeling development of a small open economy, forecasting New York Stock Exchange index and currency exchange rates and many other applications.