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The time series is fine for assessing seasonal variations in a known market, like certain types of products around Christmas or selling travel gear at certain times of the year, but, are there any type of analysis one can employ to look at larger, economic factors.
For example, if I’m in the airline business in Britain at the moment, what could I use to look at the likely effects of Brexit for example over the coming years. What type of forecasting model can be used in such cases and what type of data would one use? I know the value of the currency (sterling) is important as would factors like the possible customer sentient about increased passport controls and the loss of universal heath-care protection for British citizens going to Spain for example and this impact on passenger numbers over the coming years. However, where would one begin if you’re a small to medium size business and what type of realistic predictive model could you use?
What you are asking is not relevant for Paper F2 at all 🙂
There is no special forecasting model at all – time series analysis using seasonal variations is simply one model that might be useful for short-term seasonality. But there are no rules about forecasting and no ‘magic’ solution. It is up to management to take account of external factors (such as Brexit) and make the best forecasts that they can. However they are only ever forecasts and can never be regarded as ‘accurate’.
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