Time series analysis provides tools for selecting a model that can be used to forecast
of future events. Modeling the time series is a statistical problem. Forecasts are used in
computational procedures to estimate the parameters of a model being used to allocated
limited resources or to describe random processes such as those mentioned above. Time
series models assume that observations vary according to some probability distribution
about an underlying function of time.
Time series analysis is not the only way of obtaining forecasts. Expert judgment is
often used to predict long-term changes in the structure of a system. For example,
qualitative methods such as the Delphi technique may be used to forecast major
technological innovations and their effects. Causal regression models try to predict
dependent variables as a function of other correlated observable independent variables.
In this chapter, we only begin to scratch the surface of the field, restricting our
attention to using historical time series data to develop time-dependent models. The
methods are appropriate for automatic, short-term forecasting of frequently used
information where the underlying causes of time variation are not changing markedly. In
practice, forecasts derived by these methods are likely to be modified by the analyst upon
considering information not available from the historical data.
Several methods are described in this chapter, along with their strengths and
weaknesses. Although most are simple in concept, the computations required to estimate
parameters and perform the analysis are tedious enough that computer implementation is
essential. For a more detailed treatment of the field, the reader is referred to the
bibliography.