WHICH IS SLIGHTLY
ADVANCED IN TERMS OF CALCULATIONS AND DATA COLLECTIONS BUT IS CONSIDERED TO BE
THE MOST ACCURATE FOR PREDICTIONS. ALL THE ESTIMATIONS ARE BASED ON THE PAST
DATA AVAILABLE AND THE FACTORS THAT ARE INFLUENCING IT DIRECTLY OR INDIRECTLY.
STEPS FOR REGRESSION ANALYSIS NOW LET’S GO OVER THE STEPS THAT ARE INVOLVED IN
REGRESSION ANALYSIS METHOD ONE BY ONE.
STEP 1 DETERMINING THE VARIABLES IS THE
VERY FIRST STEP WHICH INVOLVES THE DETERMINATION OR RECOGNITION OF YOUR
VARIABLES BASED ON WHICH THE FORECASTING WILL BE DONE. LET’S CONSIDER AN
EXAMPLE OF A COMMODITY A AND STATE ITS VARIABLES IN TERMS OF ITS DEMAND
FUNCTION BELOW REGRESSION ANALYSIS TERMINOLOGY STARTING WITH THE TERM
REGRESSION ANALYSIS, IT IS A STATISTICAL PROCESS USED FOR FINDING OUT OR
ESTIMATING THE RELATIONSHIP BETWEEN ONE OR MORE INDEPENDENT/PREDICTOR VARIABLES
AND THE INDEPENDENT/RESPONSE VARIABLE.
INDEPENDENT/PREDICTOR VARIABLE THAT WE
ARE TRYING TO PREDICT WHERE AS DEPENDENT/RESPONSE IS THE ONE THAT IS EFFECTING
IT DIRECTLY OR INDIRECTLY MULTIPLE REGRESSION ANALYSIS INVOLVES MULTIPLE
AVAILABLE WHICH IS SLIGHTLY ANNOUNCED IN TERMS OF CALCULATIONS AND DATA
COLLECTIONS BUT IS CONSIDERED TO BE THE MOST ACCURATE FOR PREDICTIONS. ALL THE
ESTIMATIONS ARE BASED ON THE PAST DATA AVAILABLE AND THE FACTORS THAT ARE
INFLUENCING IT DIRECTLY OR INDIRECTLY. STEPS FOR REGRESSION ANALYSIS NOW LET’S
GO OVER THE STEPS THAT ARE INVOLVED IN REGRESSION ANALYSIS METHOD ONE BY ONE.
STEP 1 DETERMINING THE VARIABLES IS THE VERY FIRST STEP WHICH INVOLVES THE
DETERMINATION OR RECOGNITION OF YOUR VARIABLES BASED ON WHICH THE FORECASTING
WILL BE DONE. LET’S CONSIDER AN EXAMPLE OF A COMMODITY AND STATE ITS VARIABLES
IN TERMS OF ITS DEMAND FUNCTION BELOW. ZDA =F(PZ, Y, A, PS, PC) WHERE, ZDA =
DEMAND FOR COMMODITY A PRICE OF COMMODITY A (PZ)CONSUMER INCOME (Y) ADVERTISING
EXPENDITURE INCURRED ON COMMODITY DEMAND THAT IS EXPLAINED LATER IN THE BELOW
STEPS KNOWING HOW TO SELECT YOUR VARIABLES FOR THE DEMAND FUNCTION IS VERY
IMPORTANT, THE VARIABLE THAT ARE TO BE SELECTED SHOULD HAVE A SIGNIFICANT
IMPORTANCE ON THE DEMAND THAT COMMODITY AND WHEREAS THE USE OF TOO MANY
VARIABLES AND UNIMPORTANT FACTORS SHOULD BE OVERLOOKED, BELOW IS AN EXAMPLE OF
WHAT’S STATED ABOVE WHEN A CERTAIN BRAND OF CLOTHING IS PREDICTING THE DEMAND
OF THEIR SEASONAL PRICED COMMODITY LIKE HOUSING IS CONSIDERED THEN FACTORS SUCH
RS CREDIT ACCOUNTS AND INTEREST PLAY A VITAL ROLE.
ADDING EXTRA VARIABLES THAT
HAS NEGLIGIBLE AFFECT OR NO EFFECTS WILL MAKE YOUR ANALYSIS COMPLICATED AND TOO
MUCH WORK SO IT’S KEPT SIMPLE. STEP 2 PAST DATA COLLECTIONS DONE YOU HAVE YOUR
VARIABLES SET AND DETERMINED THE NEXT IMPORTANT STEP IN THE PROCESS IS THE
COLLECTED OF THE PAST DATA. THE DATA THAT SHOULD BE GATHERED MUST BE WITH
RESPECT TO THE VARIABLES THAT YOU HAVE DETERMINED OR SET. THE DATA COLLECTION
CAN BE DONE IN TWO DIFFERENT UNIQUE WAYS DESCRIBED BELOW FIRSTLY, IT CAN BE
COLLECTED WITH RESPECT TO THE POPULATION IN TERMS OF INCOME, PRICES, ETC. FOR
VARIOUS TIME PERIODS.
ALSO CAN BE COLLECTED WITH RESPECT TO INCOME AND PRICES
FOR THE DIFFERENT REGIONS OF THE MARKET FOR A PARTICULAR TIME PERIOD. REMEMBER
THAT FREQUENCY OF THE DATA COLLECTED CAN BE OF VARIOUS PERIODS SUCH AS FOR A
MONTH, HALF A YEAR OR A YEAR OR SO, BUT THE REGULARITY OF THE FREQUENCY IS
IMPORTANT AND IT SHOULD BE MAINTAINED, FOR EXAMPLE IF THE DATA COLLECTED IS FOR
EVERY OTHER YEAR OR SO IT IS BEST TO KEEP ON COLLECTING THE DATA YEAR WISE AND
NOT TO SHIP ANY YEAR.
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