Econ Midterm 2
how to calculate bias
average of the error average(ft-dt)
Mean Absolute Error Percentage (MAE %)
average(abs error)/average(demand)
induced effects
impact of local household spending disposable income
gap analysis
linking supply and demand if forecasted construction<new construction needed, then there is a shortage uses sensitivity analysis and assumptions
if lq = 1
same proportion of local workers as work in that industry
Mean Squared Error (MSE)
the average of the squared differences between the forecasted and observed values
export base theory
Economic growth of the city or region is dependent entirely on growth in the export ("basic") sector of the local economy
value appreciation multiplier
(1+purchase price growth rate)^n/(1+discount rate)^n
bias
-how far the expected value is from the true value -tells us if forecasts are too high or too low -gives direction of the error
precision
-how similar the estimates are to each other -gives us magnitude of the error
steps for trend
1. Exponential smoothing 2. Trend component 3. Add together for final forecast
effects from growth in industry
1. direct 2. indirect 3.induced
estimated value of property
= pv of total income/(1-value appreciation multiplier)
Qualitative Forecasting Methods
Market surveys/ feedback market research Delphi method panel consensus
location quotient
The percentage of total local employment in a particular industry compared to the percentage of total national employment in that same industry. % region/%nation
Cost Approach
The process of estimating the value of a property by adding to the estimated land value the appraiser's estimate of the reproduction or replacement cost of the building, less depreciation.
Income Approach
The process of estimating the value of an income-producing property through capitalization of the annual net income expected to be produced by the property during its remaining useful life. DCF cap rate approach
Sales Comparison Approach
Valuation method which compares a subject property's characteristics with those of comparable properties which have recently sold in similar transactions. must adjust comps prices weights used reflect appraiser's opinion
direct effects
amount of additional money available to flow thru local economy
reproduction cost
cost of reproducing an exact replica on basis of current proces
replacement cost
cost of similar new property having nearest equivalent
exponential smoothing
ft = ft-1+ alpha*(dt-1 - ft-1) most recent data has more weight
NAICS (North American Industry Classification System)
hierarchical coding system to classify economic activity into 20 industry sectors on the census website
if lq<1
local area is less concentrated all non basic employment
Economic Base Analysis
looks at basic and non-basic economic activities forecasting employment growth in those industries using location quotient and NAICS
shorter time horizon
more responsive
longer time horizon
more stable smoothes data
local goods and services
non basic or service sector
export goods and serviceds
produced in greater quantities known as basic sector
If LQ > 1
region has concentration of industry's employment proportion of employment that is basic = LQ-1/LQ non basic = 1/LQ
indirect effects
spending money that flows from direct effects to input suppliers
Root mean square error
sqrt(average(error)^2)
root mean square error percentage
sqrt(average(error)^2)/averagedemand
comparative advantage
the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors impact of Google campus coming to Boulder
mean absolute error MAE
the average of the absolute values of the forecast errors average(abs error)
mean absolute percentage error MAPE
the average of the absolute values of the percentage forecast errors measures accuracy average(abs error/demand)
economic base
the manufacturing and service activities performed by the basic sector of a city's labor force; functions of a city performed to satisfy demands external to the city itself and, in that performance, earning income to support the urban population
exponential moving with trend
trend component= trend component (t-1)+ B*(ES component(t)-final forecast(t-1)
profitability analysis
uses assumptions on prices and costs to calculate supply and demand
weighted average
weight * demand + weight*demand...
quantitative forecasting methods
weighted average exponential smoothing with/without trend linear regression machine learning
sensitivity analysis
which assumptions the forecasts are most sensitive to
trend impact
without trend will always lag behind the trend