Week 4 DQ 1&2

"Forecasting" Please respond to the following:

Choose one of the forecasting methods and explain the rationale behind using it in real-life. Describe how a domestic fast food chain with plans for expanding into China would be able to use a forecasting model.

Time series methods use historical data assuming the future will be like the past. Data is used to identify a pattern or trend over time. Forecasting can involve many assumptions and uncertainty. Seasonal adjustment is done to filter out variations that are associated with a certain time of the year and also provides a comparison from consecutive periods. In order to filter out the variations the seasonal adjustment data has to be decomposed in order to simplify the data into understandable components. Once the seasonal data has been isolated you are left with the true movements in the data versus the fluctuations + true movements, as a result of seasonal data decomposition and forecasting. If a domestic fast food chain with plans for expanding into China would rely on a time series method of forecasting. Every region has holidays and various events that can influence a businesss gross income. Since the food chain is breaking into a new market, it could forecast based on the events of previous new market entrances.
What is the difference between a causal model and a time- series model? Give an example of when each would be used. What are some of the problems and drawbacks of the moving average forecasting model? How do you determine how many observations to average in a moving average model? How do you determine the weightings to use in a weighted moving average model?