Chapter 5: Analyze the Data

Base Rate

Probability of some event occurring based on some historical average

Base Rate Fallacy

occurs when a prediction places too little weight on the base rate and instead favors different or new information as the basis for prediction

Cash Flow Analysis

A prescriptive analytics technique that evaluates future cash flows for potential investments or expenditures, typically using NPV or internal rate of return IRR

Classification

a predictive analytics technique to separate, segment, or classify a sample (or pop) into two or more groups/classes

Confirmatory Data Analytics

Predictive and prescriptive analytics that use various techniques and statistics to evaluate the likelihood (probability) of a future event or outcome occurring.

Credit Score

a number assigned to a person that indicates to lenders their capacity to repay a loan.

Customer Purchase Pattern

means of classifying or segmenting customers according to what they have bought

Customer touchpoints

the ways in which a company engages with its customers

Fraud

deception intended to result in financial gain

goal seek analysis

A form of what if analysis that tells us what will need to be done (or assumed) in order to reach a desired outcome, output, or result.

marginal/incremental analysis

prescriptive analytics technique that determines the change in profit typically associated with the cost or benefit of the next unit

Persistence

repeatability or continuity and durability of critical variables, such as earnings, sales, or cash flows over time; an estimate of whether past trends will continue into the future

Predictive Analytics

analytics performed to identify the best possible options given constraints or expectations

Regression

predictive analytics technique used to estimate an outcome based on inputs

Scenario Analysis

a prescriptive analytics technique that predicts how changing multiple inputs at the same time will affect an outcome variable

Sensitivity analysis

a prescriptive analytics technique that predicts how changing one input will affect an outcome variable

Time Series Analysis

A predictive analytics technique used to predict future values based on past values of the same variable.

What if analysis

a prescriptive analytics technique that evaluates how potential changes in inputs may affect outputs

Which predictive analytics technique would be used to predict product demand using past product demand values?

Time series analysis

Which predictive analytics technique would be used to place a company's customers into different segments/categories

classification

Which term refers to the repeatability and durability of critical variables such as earnings, sales, cash flows. and product demand

persistence

Not considering historical averages when making predictions of possible future events is known as

base rate fallacy

Which type of analysis starts with the desired outcome and works backward to determine necessary inputs

goal seek

predicating the impacts of employee wages on net income is an example of

sensitivity

determining a company's break-even level of sales is an example of which type of analysis

goal seek

assume that a data analyst uses regression to predict the interest rate that a bank will quote to a borrower. Which type of variable is the interest rate?

dependent variable

assume that we use weather as a factor to predict product demand. Which type of variable is the weather?

Independent

Unlike exploratory analytics, confirmatory analytics are

probabilistic

which scenario does an upper confidence bound in a time series represent

best case