Horti-Business Management (2+0)

Price forecasting techniques

• An important part of anticipating both future price levels and the risk that anticipated prices will not be achieved is developing strategies for forecasting prices. Different forecasting models work best for different situations- the nature of the business, the nature of data, forecast granularity, forecast horizon, shelf life of the model and the expected accuracy of the forecasts. Forecast granularity is the unit of time of each forecast. Forecast horizon is the number of time units into the future for which forecasts are required. For example, weekly forecasts for the next 2 months have a granularity of a week and a horizon of 8 weeks. Shelf life is the time after which a model becomes useless and there is a need to switch to another model.
• In general, there are two basic approaches to forecasting prices in markets:
1. Fundamental analysis
2. Technical analysis
• While they are often presented as substitutes or competitors in price forecasting, the two can be complimentary. Most market analysts pay attention to both fundamental and technical factors even though they may emphasize one over the other.