RISK: EXPONENTIAL SMOOTHING FORECASTING AND VALUE OF INFORMATION Risk: Simple Exponential Smoothing (SES) Assignment Overview Scenario: You are a consultant for the Excellent Consulting Group (ECG). You have completed the first assignment, developing and

Module 4 - Background

RISK: EXPONENTIAL SMOOTHING FORECASTING AND VALUE OF INFORMATION

Case Background

What if you cannot find another factor that has a high correlation with the forecasted factor? Are there other forecasting methods other than Linear Regression? How do you determine which method is actually the best one?

Chase, C. W., (2013). Demand-driven forecasting: A structured approach to forecasting. John Wiley & Sons. Somerset, NJ. Retrieved from Ebrary.

From the source above, read: SEE ATTACHED

· Chapter 3, pp. 91–93 (the section Some Causes of Forecast Error)

· Chapter 4, pp. 103–113, which provides information on forecast error measures; pay special attention to the sections on the MAPE measurement

· Chapter 5, pp. 125–147; pay attention the sections on Simple Exponential Smoothing (SES)

Download the Excel file  Case 4 Examples-Practice.xlsx   (SEE ATTACHED ) that contains an example and a Practice Exercise.

Watch this video that shows how to do SES and calculate MAPE:  http://permalink.fliqz.com/aspx/permalink.aspx?at=75d6cc75bbe742159e56ad8836531c1d&a=5fae3cf0f1624f39b0341263a6541ea0

PRACTICE: Do the Practice Exercise in the Excel file:  Case 4 Examples – Practice (SEE ATTACHED ). Check your work.

You are ready to do the Case 4 problem.

SLP Background

Consider that you may be pretty good sometimes at estimating future probabilities. But you also acknowledge that you might be biased, too. This is where experts are useful, although they do charge a fee for their services. What is the value of the information you could get from an expert? Is it worth paying this expert for his/her advice? Read the paper  Deciding to Use an Expert (SEE ATTACHED ) that explains how to make this decision.

Download the Excel file  SLP 4 Examples-Practice.xlsx  (SEE ATTACHED ) that provides examples and a Practice Exercise.

Watch this video showing how to determine the value of information:  http://permalink.fliqz.com/aspx/permalink.aspx?at=f616909cae2d4d06834359502f672aff&a=5fae3cf0f1624f39b0341263a6541ea0

Practice determining the Value of Information; do the Practice Exercise in the Excel file.

You are ready for SLP 4.

Additional Required Reading

(For Discussions, Module 2, 3, and 4)

Download and read  Subjective Assessments of Risk and Uncertainty  (SEE ATTACHED ) on subjective probabilities in risk decisions. This paper will be useful for the discussion questions in Module 2, 3, and 4.

Get this journal article from the library. It is lengthy, but you only need to read Section 1.1, pp. 3-5. This section provides a very good review of three major biases that have been studied by the famous team of Kahneman and Tversky.

Laibson, D., & Zeckhauser, R. (1998). Amos Tversky and the ascent of behavioral economics. Journal of Risk & Uncertainty. Feb1998, Vol. 16 Issue 1, p7-47. 41p. Retrieved from Business Source Complete (EBSCO) in the Trident Online Library.