Chapter 3: Times Series Forecasting Decisions

What will happen in the future?

Predicting the future is a popular pursuit among forecasters of all stripes, regardless of whether they are economic, political or social prognosticators. To make a prediction, three main techniques are used. Judgmental forecasts rely on individual (or group) expertise within a field of study, which is obtained through education, training and experience; for example, predicting the future price of a barrel of oil (WTI).¹ Econometric models rely of analyses of large datasets to discern causal relationships between variables, such as the demand for international air travel based on changes in world GDP. Time series models use longitudinal studies to uncover systematic patterns in data to make predictions.