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Practical Predictive Analytics by Ralph Winters

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Plotting future values with confidence bands

Use the plot function to plot future predictions. Notice that the prediction for the last value encompasses upper and lower confidence bands surrounding a horizontal prediction line. But why a horizontal prediction line? This is saying that there is no trend or seasonality for the exponential model, and that the best prediction is based upon the last value of the smoothed average. However, we can see that there is significant variation to the prediction, based upon the confidence bands. The confidence bands will also increase in size as the forecast period increases, to reflect the uncertainty associated with the forecast:

plot(forecast(fit))

 

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