Qualitative forecasting techniques
Qualitative Forecasting Approaches
Qualitative forecasting methods are based primarily on human judgement. Quantitative forecasting methods are based primarily on the mathematical modelling of historical data. Here we provide a brief overview of the most important qualitative forecasting approaches. In many environments the time horizon is closely linked to the type of forecasting method used. Longer term and higher level forecasting will often require qualitative forecasting techniques. Such techniques may vary significantly in how they are applied. We begin with methods that rely on quantitative analysis to some degree and proceed to the more judgmental methods.
Economic indicators
The tracking of economic time series originated in the US following the great depression of the
1930's. It was realised that monthly, quarterly and annual series on such things as prices, employment and production were closely related to observed economic activity and business cycles.
Today, over 30 such series are tracked in most developed countries. It was soon realised that such series were useful for general forecasting by many organisations. Such series provide the basis for interpretative judgmental forecasting. The term economic indicator is used for an economic series on which a forecast is based.
Leading indicators provide advance warning of probable change in future economic activity.
Coincident indicators reflect current performance in an economy. Lagging indicators confirm changes previously signalled. The description of a series in these terms depends to some extent on the nature of the forecast, the business sector and type of organisation and geographical region. Composite indicators that aggregate a number of series are also important. The composite of leading indicators is an important series for signalling major changes in economic activity.
The impact of any economic indicator on demand for specific products or services is sector
1
dependent and needs to be
Qualitative forecasting methods are based primarily on human judgement. Quantitative forecasting methods are based primarily on the mathematical modelling of historical data. Here we provide a brief overview of the most important qualitative forecasting approaches. In many environments the time horizon is closely linked to the type of forecasting method used. Longer term and higher level forecasting will often require qualitative forecasting techniques. Such techniques may vary significantly in how they are applied. We begin with methods that rely on quantitative analysis to some degree and proceed to the more judgmental methods.
Economic indicators
The tracking of economic time series originated in the US following the great depression of the
1930's. It was realised that monthly, quarterly and annual series on such things as prices, employment and production were closely related to observed economic activity and business cycles.
Today, over 30 such series are tracked in most developed countries. It was soon realised that such series were useful for general forecasting by many organisations. Such series provide the basis for interpretative judgmental forecasting. The term economic indicator is used for an economic series on which a forecast is based.
Leading indicators provide advance warning of probable change in future economic activity.
Coincident indicators reflect current performance in an economy. Lagging indicators confirm changes previously signalled. The description of a series in these terms depends to some extent on the nature of the forecast, the business sector and type of organisation and geographical region. Composite indicators that aggregate a number of series are also important. The composite of leading indicators is an important series for signalling major changes in economic activity.
The impact of any economic indicator on demand for specific products or services is sector
1
dependent and needs to be