Goodness of fit tests for parameters of forecasting models

Abstract

Forecasting is an important field of statistics that spans in to many fields including business and industry, government, economics, environmental sciences, medicine, social science, politics, and finance. Forecasting problems are generally classified as short-term, medium-term, and long-term models. The short-term forecasting problems involve predicting events only a few time periods (days, weeks, months) into the future. Medium-term forecasts extend from one to two years into the future, and long-term forecasting problems can extend beyond that by many years. Short- and medium-term forecasts are required for activities that range from operations management to budgeting and selecting new research and development projects. Long-term forecasts impact issues such as strategic planning. Short- and medium-term forecasting is typically based on identifying, modeling, and extrapolating the patterns found in historical data. Because these historical data usually exhibit inertia and do not change dramatically very quickly, statistical methods are very useful for short- and medium-term forecasting.