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MM 5004
OPERATIONS MANAGEMENT
Created by:
Muhammad Afif (29116476)
The purposes of this report are to (1) provide the reader with an introduction to
popular business forecasting models available, and (2) compare and contrast the ability of
those models to forecast a specific time-series data.
This paper introduces the reader to commonly used forecasting methods, including:
simple exponential smoothing, linear regression, times series decomposition, moving
average, weighted moving average and ForecastX ProCast. Additionally, comparisons
are made between the various models by looking at how well each model fits the historical
data being forecast (1 year backward of AT&Ts daily stock prices: from March 18, 2016 to
March 17, 2017) as well as how well it is able to predict the future. The summary statistic R-
square, Mean Absolute Percentage Error (MAPE), AIC, BIC, Sum of Squared Error (SSE) is
used as the yardstick for comparisons.
Conclusions
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AT&T Company Profile
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BUSINESS FORECASTING METHODS
INTRODUCTION
The data forecasted was of AT&Ts daily stock price measured in US dollar. The data
used for forecasts ranged from March 18, 2016 to March 17, 2017, although as mentioned, a
12-month holdout period was use for evaluative purposes.
FORECASTING PROCESS
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TIME HORIZON
A time horizon, also known as a planning horizon, is a fixed point of time in the
future at which point certain processes will be evaluated or assumed to end. A time horizon is
a physical impossibility in the real world. Because of a 12 month of AT&Ts daily stock price
historical data which is slightly volatile and also the stock price in every day could go up and
down, I make the time horizon for AT&Ts daily stock price in short-term period. So I
forecast the stock price for 2 weeks (10 working days).
Summary
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Abbreviations:
LR: Simple Linear Regression
SES: Simple Exponential Smoothing ( = 0,1; 0,3; 0,45; 0,6)
DSES: Decomposition combine with Simple Exponential Smoothing ( = 1)
DREG: Decomposition combine with Linear Regression
MA: Moving Average (average periods = 5)
WMA: Weighted Moving Average (average periods = 5)
Conclusions