Stochastic Forecasting

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  • November 28, 2014
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Theory A stochastic process is nothing but a mathematically defined equation that can create a series of outcomes over time, outcomes that are not deterministic in nature; that is, an … Continue Reading →

Multivariate Regression, Part 1

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  • November 26, 2014
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Theory It is assumed that the user is knowledgeable about the fundamentals of regression analysis. The general bivariate linear regression equation takes the form of where β0 is the intercept,β1 … Continue Reading →

Multivariate Regression, Part 2

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  • November 24, 2014
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As noted in “Multivariate Regression, Part 1,” it is assumed that the user is knowledgeable about the fundamentals of regression analysis. In this part, we continue our coverage of the … Continue Reading →

Box-Jenkins ARIMA Advanced Time Series

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  • November 19, 2014
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Theory One very powerful advanced times-series forecasting tool is the ARIMA or Auto-Regressive Integrated Moving Average approach, which assembles three separate tools into a comprehensive model. The first tool segment … Continue Reading →

GARCH Volatility Forecasts

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  • November 19, 2014
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Theory The generalized autoregressive conditional heteroskedasticity (GARCH) model is used to model historical and forecast future volatility levels of a marketable security (e.g., stock prices, commodity prices, oil prices, etc.). … Continue Reading →

Basic Econometrics

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  • November 19, 2014
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Theory Econometrics refers to a branch of business analytics, modeling, and forecasting techniques for modeling the behavior or forecasting certain business, financial, economic, physical science, and other variables. Running the … Continue Reading →

Cubic Spline Interpolation and Extrapolation

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  • November 12, 2014
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Theory Sometimes there are missing values in a time-series dataset. For instance, interest rates for years 1 to 3 may exist, followed by years 5 to 8, and then year … Continue Reading →

Detrending and Deseasonalizing

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  • November 12, 2014
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The data deseasonalization and detrending tool removes any seasonal and trending components in your original data (Figure 1). In forecasting models, the process usually includes removing the effects of accumulating … Continue Reading →

J-Curve and S-Curve Forecasts

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  • November 12, 2014
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Theory The J curve, or exponential growth curve, is one where the growth of the next period depends on the current period’s level and the increase is exponential. This phenomenon … Continue Reading →

Markov Chains

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  • November 5, 2014
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Theory A Markov chain exists when the probability of a future state depends on a previous state and when linked together forms a chain that reverts to a long-run steady … Continue Reading →