Question No.

1: Describe the followings and clarify the context: (5 Marks)

1. Simple Random Sampling, Stratified Sampling, Multi-stage Sampling?

Solution
Simple Random Sampling
Simple random sampling is defined as a sampling technique where every item in the
population has an even chance and likelihood of being selected in the sample. Here the
selection of items entirely depends on luck or probability, and therefore this sampling
technique is also sometimes known as a method of chances. 
Explanation
Simple random sampling is a fundamental sampling method and can easily be a
component of a more complex sampling method. The main attribute of this sampling
method is that every sample has the same probability of being chosen.
Stratified Sampling,

Definition: 
sampling is a type of sampling method in which the total population is divided into
smaller groups or strata to complete the sampling process. The strata is formed based on
some common characteristics in the population data. After dividing the population into
strata, the researcher randomly selects the sample proportionally.
Description: 
Stratified sampling is a common sampling technique used by researchers when trying to
draw conclusions from different sub-groups or strata. The strata or sub-groups should
be different and the data should not overlap. While using stratified sampling, the
researcher should use simple probability sampling. The population is divided into
various subgroups such as age, gender, nationality, job profile, educational level etc.
Stratified sampling is used when the researcher wants to understand the existing
relationship between two groups.
Multi-stage Sampling
Definition: 

Multistage sampling is defined as a sampling method that divides the population into groups
(or clusters) for conducting research. It is a complex form of cluster sampling, sometimes, also
known as multistage cluster sampling. During this sampling method, significant clusters of the
selected people are split into sub-groups at various stages to make it simpler for primary data
collection.

Steps to Conduct Multistage Sampling

There are four multistage steps to conduct multistage sampling:

 1. Step one: Choose a sampling frame, considering the population of interest. The
researcher allocates a number to every group and selects a small sample of relevant
separate groups.
2. Step two: Select a sampling frame of relevant separate sub-groups. Do this from
related, different discrete groups selected in the previous stage.
3. Step three: Repeat the second step if necessary.
4. Step four: Using some variation of probability sampling, choose the members of the
sample group from the sub-groups.
5.
2 Quantitative Approaches to Forecasting?

Solution
Quantitative Approaches to Forecasting:
Definition
It is a statistical technique to make predictions about the future which uses numerical
measures and prior effects to predict future events. These techniques are based on
models of mathematics and in nature are mostly objective. They are highly dependent
on mathematical calculations.
Types
There are two types of quantitative forecasting methods which are listed below:

1. Time-series models
These models examine the past data patterns and forecast the future on the basis of
underlying patterns that are obtained from those data. There are many types of time
series models like Simple and weighted moving average, seasonal indexes, trend
projections, simple mean and exponential smoothing.

2. Associative models
Associative models are also known as casual models. The model assumes that the
variable that is being forecasted is associated with other variables The predictions are
made based on these associations. The linear regression is one of the simplest forms of
an associative model of forecasting. This regression line forecasts the dependent
variable based on the selected value of the independent variable.

2. The Components of a Time Series?

Solution

Time Series

How do people get to know that the price of a commodity has increased over a period of time?
They can do so by comparing the prices of the commodity for a set of a time period. A set of
observations ordered with respect to the successive time periods is a time series.
Components of a Time Series

The various reasons or the forces which affect the values of an observation in a time series are
the components of a time series. The four categories of the components of time series are

 Trend

The trend shows the general tendency of the data to increase or decrease during a long
period of time. A trend is a smooth, general, long-term, average tendency. It is not always
necessary that the increase or decrease is in the same direction throughout the given period
of time.

 Seasonal Variations
 These are the rhythmic forces which operate in a regular and periodic manner over a span
of less than a year. They have the same or almost the same pattern during a period of 12
months. This variation will be present in a time series if the data are recorded hourly,
daily, weekly, quarterly, or monthly.
 Cyclic Variation

 The variations in a time series which operate themselves over a span of more than one
year are the cyclic variations. This oscillatory movement has a period of oscillation of
more than a year. One complete period is a cycle. This cyclic movement is sometimes
called the ‘Business Cycle’.

 Random or Irregular movements

There is another factor which causes the variation in the variable under study. They are
not regular variations and are purely random or irregular. These fluctuations are
unforeseen, uncontrollable, unpredictable, and are erratic. These forces are
earthquakes, wars, flood, famines, and any other disasters.

3. Measures of Forecast Accuracy?

There is probably an infinite number of forecast accuracy metrics, but most of them
are variations of the following three: forecast bias, mean average deviation (MAD), and
mean average percentage error (MAPE).

4. Using Smoothing Methods in Forecasting?

SOLUTION
 A time series is a sequence of observations which are ordered in time. Inherent in the
collection of data taken over time is some form of random variation. There exist
methods for reducing of canceling the effect due to random variation. Widely used
techniques are "smoothing". These techniques, when properly applied, reveals more
clearly the underlying trends.

Enter the time series Row-wise in sequence, starting from the left-upper corner, and the
parameter(s), then click the Calculate button for obtaining one-period-ahead forecasting.

Blank boxes are not included in the calculations but zeros are.

In entering your data to move from cell to cell in the data-matrix use the Tab key not arrow or
enter keys.

Features of time series, which might be revealed by examining its graph, with the forecasted
values, and the residuals behavior, condition forecasting modeling.

Moving Averages:

 Moving averages rank among the most popular techniques for the preprocessing of time
series. They are used to filter random "white noise" from the data, to make the time series
smoother or even to emphasize certain informational components contained in the time series.

Exponential Smoothing: 

This is a very popular scheme to produce a smoothed Time Series. Whereas in Moving
Averages the past observations are weighted equally, Exponential Smoothing assigns
exponentially decreasing weights as the observation get older. In other words, recent
observations are given relatively more weight in forecasting than the older
observations. Double Exponential Smoothing is better at handling trends. Triple Exponential
Smoothing is better at handling parabola trends.

Question No.2: Describe the followings and clarify the context: (5 Marks)

1. Using Trend Projection in Forecasting?

Definition:
 The Trend Projection Method is the most classical method of business forecasting,
which is concerned with the movement of variables through time. This method requires
a long time-series data.
Description
 The trend projection method is based on the assumption that the factors liable for the
past trends in the variables to be projected shall continue to play their role in the future
in the same manner and to the same extent as they did in the past while determining the
variable’s magnitude and direction.

Graphical Method:
It is the most simple statistical method in which the annual sales data are plotted on a graph,
and a line is drawn through these plotted points. A free hand line is drawn in such a way that
the distance between points and the line is the minimum. Under this method, it is assumed that
future sales will assume the same trend as followed by the past sales records. Although the
graphical method is simple and inexpensive, it is not considered to be reliable. This is because
the extension of the trend line may involve subjectivity and personal bias of the researcher.
Fitting Trend Equation or Least Square Method: 

The least square method is a formal technique in which the trend-line is fitted in the time-
series using the statistical data to determine the trend of demand. The form of trend equation
that can be fitted to the time-series data can be determined either by plotting the sales data or
trying different forms of the equation that best fits the data. Once the data is plotted, it shows
several trends

2. Using Trend and Seasonal Components in Forecasting?

Trend

The trend shows the general tendency of the data to increase or decrease during a long
period of time. A trend is a smooth, general, long-term, average tendency. It is not always
necessary that the increase or decrease is in the same direction throughout the given period
of time.

 Seasonal Variations
 These are the rhythmic forces which operate in a regular and periodic manner over a span
of less than a year. They have the same or almost the same pattern during a period of 12
months. This variation will be present in a time series if the data are recorded hourly,
daily, weekly, quarterly, or monthly.

3. Using Regression Analysis in Forecasting?

Regression analysis is a statistical technique for quantifying the relationship between
variables. For forecasting purposes, knowing the quantified relationship between the variables
allows us to provide forecasting estimates. Simple linear regression is commonly used in
forecasting and financial analysis—for a company to tell how a change in the GDP could
affect sales,
4. Qualitative Approaches to Forecasting?
Qualitative forecasting is based on information that can’t be measured. It’s especially
important when a company’s just starting out, since there’s a lack of historical data.
Past data may be incorporated in qualitative forecasting, or it may not. Human
judgement is key and the challenge is to process this judgement in an unbiased, logical
way that results in quantitative estimates.This forecasting technique is best for long-
term forecasts, to forecast new business ventures and forecasts of margins.Qualitative
forecasting methods are informed opinion and judgment, the Delphi method, market
research, and historical life-cycle analogy.

5. Developing a Decision Strategy?

 Ans: Similar to operations management, project management employs an array of
quantitative techniques while performing planning, scheduling, forecasting, and
monitoring tasks. The main purpose of the quantitative approach is to make an optimal
decision by using mathematical and statistical models in a situation when the probability
of all outcomes is uncertain. A lot of quantitative tools have been developed to aid
managers in effective decision-making. These can be broadly classified into several
popular groups.

• • Decision trees
• • Mathematical programming
• • Capital budgeting
• • Inventory management
• • Linear programming
• • Network analysis
• • simulations
• “THE END”