Predictive Modeling: Types, Benefits, and Algorithms
Predictive Modeling: Types, Benefits, and Algorithms
Most predictive models work fast and often complete their calculations in real
time. That’s why banks and retailers can, for example, calculate the risk of an
online mortgage or credit card application and accept or decline the request
almost instantly based on that prediction.
Some predictive models are more complex, such as those used in computational
biology and quantum computing; the resulting outputs take longer to compute
than a credit card application but are done much more quickly than was possible
in the past thanks to advances in technological capabilities, including computing
power.
Top 5 Types of Predictive Models
Fortunately, predictive models don’t have to be created from scratch for every
application. Predictive analytics tools use a variety of vetted models and
algorithms that can be applied to a wide spread of use cases.
Predictive modeling techniques have been perfected over time. As we add more
data, more muscular computing, AI and machine learning and see overall
advancements in analytics, we’re able to do more with these models.
Also, being able to use more data in predictive modeling is an advantage only to
a point. Too much data can skew the calculation and lead to a meaningless or an
erroneous outcome. For example, more coats are sold as the outside
temperature drops. But only to a point. People do not buy more coats when it’s -
20 degrees Fahrenheit outside than they do when it’s -5 degrees below freezing.
At a certain point, cold is cold enough to spur the purchase of coats and more
frigid temps no longer appreciably change that pattern.