Developing a Forecasting Model

Requirements Clarification & Assessment

1. Understand the Problem Statement:

   • Clearly define the objective of the forecasting model. In this case, the goal is to predict future values based on historical data.
   • Identify the specific business problem or decision-making process the model will support.

2. Identify the Target Variable:

   • Determine what you are trying to forecast (e.g., sales, demand, stock prices).
   • Assess the time horizon for the forecast (e.g., daily, weekly, monthly).

3. Data Requirements:

   • Identify the data needed for the model, including historical data and potential external variables that could impact the forecast.
   • Evaluate data availability, quality, and accessibility.

4. Stakeholder Inputs:

   • Engage with stakeholders to gather insights and requirements.
   • Understand constraints such as timeline, budget, and computational resources.

5. Performance Metrics:

   • Define success criteria and key performance indicators (KPIs) for the model (e.g., Mean Absolute Error, Root Mean Squared Error).
   • Determine the acceptable level of accuracy and trade-offs between precision and recall.