6 Forecasting a Time Series: Regression

Smoothing approaches to forecasting, such as simple exponential smoothing and Holt’s linear smoothing, belong to a branch of analytics usually known as nonparametric techniques. That means that you are not calculating a statistic from a sample and evaluating it in light of your knowledge about the measure’s distribution in a population.

But analytics also includes many parametric methods, and one of them is regression analysis. Regression is often a plausible alternative to smoothing when you want to forecast from a baseline of observations. It involves some tests that are considered parametric—t-tests, for example, which you ...

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