Forecasting is the use of historic data to determine the direction of future trends. As Investors you need forecasting to determine if events affecting a company, such as sales expectations, will increase or decrease the price of shares in the company of your choice.
Our Stock analysts use various forecasting methods to determine how a stock’s price will move in the future. They might look at revenue and compare it to economic indicators such as leading indicators, coincident indicators and lagging indicators. Changes to financial or statistical data are observed to determine the relationship between multiple variables. These relationships may be based on the passage of time or the occurrence of specific events. For example, a sales forecast may be based upon a specific period (the passage of the next 12 months) or the occurrence of an event (the purchase of a competitor’s business).
Qualitative forecasting models are useful in developing forecasts with a limited scope. These models are highly reliant on our expert opinions and are most beneficial in the short term.
Examples of qualitative forecasting models include market research, polls and surveys that apply the Delphi method. Quantitative methods of forecasting exclude our expert opinions and utilize statistical data based on quantitative information. Quantitative forecasting models include time series methods, discounting, analysis of leading or lagging indicators and econometric modeling.