How to choose forecasting models

Steps in choosing a forecasting model
Forecasting flow chart
Data transformations and forecasting models: what to use and when
Automatic forecasting software
Political and ethical issues in forecasting
How to avoid trouble: principles of good data analysis

Automatic Forecasting Software

There are a number of software packages on the market that advertise "automatic" forecasting capabilities: you put a time series in, and the package automatically identifies and fits the "best" model from among some class of models. Some of them bill themselves as "expert systems" on relatively flimsy grounds, while others more-or-less live up to their claims. With regard to such software, I would offer the same warning as with stepwise regression: properly used, and guided by experience with "manual" model-fitting, the best of such software can put more data-analysis power at your fingertips and speed up routine forecasting applications. Carelessly used, it merely allows you to foul things up in a bigger way, obtaining results without insight while getting a false sense of security that "the computer knows best." Automatic forecasting software is a complement to, not a substitute for, your own forecasting expertise. When evaluating such software, here are a few points to keep in mind:

Forecast Pro for Windows
, developed by Robert Goodrich and Eric Stellwagen (Business Forecast Systems Inc., Belmont, Massachusetts) appears to me to be one of the better of these programs. It offers capabilities for fitting the most commonly-used models--exponential smoothing, multiple regression, and ARIMA--and it provides decent diagnostic support while offering model-selection advice which is usually sound.

Comparison of features between Forecast Pro and Statgraphics

Common features of both programs:

Advantages and/or nice features of Forecast Pro:

Disadvantages and/or caveats:

Examples of automated analysis with Forecast Pro (v. 2):

Example #1: Department store data

Example #2: Time series models for auto sales series