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Chapter Five Copyright 2009 Pearson Education, Inc. Publishi 1 Chapter 5 Demand Estimation and Forecasting Chapter Five Copyright 2009 Pearson Education, Inc. Publishi 2 Overview Regression analysis Hazards with use of regression analysis Subjects of forecasts Prerequisites of a good forecast Forecasting techniques Chapter Five Copyright 2009 Pearson Education, Inc. Publishi 3 Learning objectives understand importance of forecasting in business describe six different forecasting techniques know how to specify and interpret a regression Chapter Five Copyright 2009 Pearson Education, Inc. Publishi 4 Learning objectives recognize limitations of consumer data use seasonal and smoothing methods Chapter Five Copyright 2009 Pearson Education, Inc. Publishi 5 Data collection Data for studies pertaining to countries, regions, or industries are readily available Data for analysis of specific product categories may be more difficult to obtain buy from data providers (e.g. ACNielsen, IRI) perform a consumer survey focus groups technology: point-of-sale, bar codes Chapter Five Copyright 2009 Pearson Education, Inc. Publishi 6 Regression analysis Regression analysis : a procedure commonly used by economists to estimate consumer demand with available data Two types of regression: cross-sectional: analyze several variables for a single period of time time series data: analyze a single variable over multiple periods of time Chapter Five Copyright 2009 Pearson Education, Inc. Publishi 7 Regression analysis Regression equation: linear, additive eg: Y = a + b 1 X 1 + b 2 X 2 + b 3 X 3 + b 4 X 4 Y: dependent variable a: constant value, y-intercept X n : independent variables, used to explain Y b n : regression coefficients (measure impact of independent variables) Chapter Five Copyright 2009 Pearson Education, Inc. Publishi 8 Regression analysis Interpreting the regression results: coefficients : negative coefficient shows that as the independent variable (X n ) changes, the variable (Y) changes in the opposite direction positive coefficient shows that as the independent variable (X n ) changes, the dependent variable (Y) changes in the same direction magnitude of regression coefficients is a measure of elasticity of each variable Chapter Five Copyright 2009 Pearson Education, Inc. Publishi 9 Regression analysis Statistical evaluation of regression results: t-test : test of statistical significance of each estimated coefficient b = estimated coefficient SE b = standard error of estimated coefficient b SE b t = Chapter Five... View Full Document