Predictive models forecast what will happen in the future. These models work because natural events often follow patterns.
To calculate the probability of a future outcome, most predictive models factor in historical data along with what we know about rules and relationships among the variables involved.
Because they deal with the future, which hasn’t happened yet, all predictive models have a degree of uncertainty. So most predictive models include some way to communicate the nature of that uncertainty.
- Human error in data collection
- Accuracy of measuring equipment
- Precision of data collection device
- Historical conditions no longer apply
- Random behavior of the system itself, no pattern
- Important variables left out of the model
- The predictive model itself influences the outcome