Causal forecasting methods are used when: a. historical data is available and there is a relationship between the item to be forecasted and some other factor (such as advertising expenditure or sales of another product). b. historical data is not available and there is a relationship between the item to be forecasted and some other factor (such as advertising expenditure or sales of another product).

Question

Laura Kelly

Business

21 February, 14:33

Causal forecasting methods are used when: a. historical data is available and there is a relationship between the item to be forecasted and some other factor (such as advertising expenditure or sales of another product). b. historical data is not available and there is a relationship between the item to be forecasted and some other factor (such as advertising expenditure or sales of another product).

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Jacqueline Edwards · Answer 1

historical data is available and there is a relationship between the item to be forecasted and some other factor (such as advertising expenditure or sales of another product).

Explanation:

In forecasting we use the causal forecasting method when historical data proves that a relationship exists between a factor to be forecasted and other factors (including competitors, economic factors, and socioeconomic factors). There is assumption that cause and effect relationship exists between the factor to be forecasted and one or more independent variables.

Causal method is the most sophisticated forecasting tool as it makes use of mathematical relationship of the various causal factors.

There are three models used for forecasting: qualitative techniques, time series analysis and projection, and causal methods.