How do you account for COVID?
We are looking at creating a finance model to predict revenues and expenditures on a quarterly basis.
My first question is how to account for the COVID impact for March 2020 to present? I’m sure every business was impacted at least somewhat, how do you account for it in your modeling? Do you ignore data for a certain time period (which is the best solution I can think of) or do you have other ways of reducing the impact?
Answers
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Hi Aaron,
A simple method we've seen is adding a binary COVID/non-COVID variable to the data for training and inference.
You could also bring in more detailed public COVID-related data - whatever metric you think may have had an impact on the particular revenues or expenditures you're predicting. Could be cases, cases per 100k people, deaths, etc.
You could also bring in broader economic data that may pick up on the effects of COVID at various times over the past couple years, like the BEA's consumer spending data.
Feel free to reach out to your CSM if you'd like to talk details with our team.
Best,
Pat
