Forecasting process

The forecasting process, illustrated in the following diagram, represents a typical process flow that can be applied to both time series and other models. There isn't a stage in the process that is more important than others. However, a good understanding of the business problem should be the building block of any modeling process:

Figure 2.2: Forecasting process

Let us walk through the process of forecasting:

1. Define the business problem and state what the model expects to achieve.
2. Collect data from various sources and systems and transform it to clean data.
3. Plot the data, run statistical tests, fit the model, and interpret the results.
4. Validate the model by using a holdout sample.
5. Obtain a model sign after it meets the technical and the business requirements. Integrate it into the business process.

Most modelers spend a disproportionate amount of time...