Business Case Studies & Business Publications

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Lichtendahl, Kenne...

Case

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Lichtendahl, Kenneth C. Jr.; Grushka-Cockayne, Yael

QA-0748 | Published July 21, 2010 | 10 pages Case

Collection: Darden School of Business

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A large general-merchandise retailer misses its fiscal year earnings-per-share guidance, so its CFO is charged with improving the firm's forecasts. This case presents the use of probability distributions for forecasting discrete and continuous uncertainties such as GDP growth, inflation, and unemployment, including the benefit of ranges and distributions over point estimates. The Federal Reserve Bank of Philadelphia's Survey of Professional Forecasters is introduced as a source of forecasts.

? Use probability distributions for forecasting discrete and continuous uncertainties. ? Understand the benefit of using ranges and distributions versus point estimate when forecasting. ? Gain experience using scoring rules for evaluating multiple forecasts and understand the benefits and shortcomings of different scoring rules. ? Learn of a real-world environment, the Federal Reserve Bank of Philadelphia's Survey of Professional Forecasters, which makes use of probability forecasts. ? Learn of the dangers of overconfidence and anchoring when providing a forecast.