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Chapter: Business Science : Security Analysis and Portfolio Management : Fundamental Analysis

Forecasting Techniques

1. Anticipatory surveys: 2.Trend Analysis method: 3. Diffusion Indexes : 4. Monetary Indicators: 5. Econometric Model: 6. Opportunistic model:

FORECASTING TECHNIQUES

 

1. Anticipatory surveys:

 

a. Expet Opinion   Delphi Technique:

 

A  systematic forecasting method that   involves  structured interaction     among

 

a  group of  experts on a subject

 

b. Cross-Impact Analysis:

 

Analysis of high importance and high probability

 

c. Multiple scenario: building of pictures of alternative futures.

 

2.Trend Analysis method: based on time series

 

a.     Trend Extrapolation: analyze and fit time series data( Linear quadratic or s shaped growth curves)

 

b.     Trend correlation: It also know as barometric or indicator approach.

 

Leading Indicators: To know the economic direction in advance eg., rainfall

 

Coincidental Indicators: Economic factors reaching approximately at the same time as the economy

 

eg., GNP, Interest rates

 

Lagging Indicators: Economic factors reaching their peaks or troughs after the economy has already reached its own.

 

eg., Unemployment and inventory debtors.

 

3. Diffusion Indexes : It is an indicator of spread of an expansion.

 

a. Composite or consensus Index: It combines several indictors into one single measure .

 

Eg: Diffusion Index:

 

No of members in the set in the same direction  /   Total no of members in the set

 

b. Component Evaluation Index: It measures the breadth of the movement within a particular series.

 

4.  Monetary Indicators: Deals with money supply, corporate profits, interest rates and stock prices sprinkle observed.

 

5. Econometric Model: It explains past economic activity by deriving mathematical equation. Eg., Disposable Income Inventories.

 

6. Opportunistic model:

 

a.     Hypothesis of total demand: Deals with environmental decisions as war or peace

 

b.     Test of consistency and comparison: Measure the internal consistency and comparing with other projections.

 

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Business Science : Security Analysis and Portfolio Management : Fundamental Analysis : Forecasting Techniques |


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