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