Question

Month	1	2	3	4	5	6	7
Value	25	14	21	13	20	24	16

(b)

Develop the three-month moving average forecasts for this time series.

Month	Time Series Value	Forecast
1	25
2	14
3	21
4	13
5	20
6	24
7	16

Compute MSE. (Round your answer to two decimal places.)

MSE =

What is the forecast for month 8?

(c)

Use α = 0.2 to compute the exponential smoothing forecasts for the time series. (Round your answers to two decimal places.)

Month	Time Series Value	Forecast
1	25
2	14
3	21
4	13
5	20
6	24
7	16

Compute MSE. (Round your answer to two decimal places.)

MSE =

What is the forecast for month 8? (Round your answer to two decimal places.)

(d)

Compare the three-month moving average approach with the exponential smoothing approach using

α = 0.2.

Which appears to provide more accurate forecasts based on MSE?

The three-month moving average provides a better forecast since it has a smaller MSE than the exponential smoothing using α = 0.2.The exponential smoothing using α = 0.2 provides a better forecast since it has a smaller MSE than the three-month moving average.     The exponential smoothing using α = 0.2 provides a better forecast since it has a larger MSE than the three-month moving average.The three-month moving average provides a better forecast since it has a larger MSE than the exponential smoothing using α = 0.2.

Answer 1

b)

		3 month
		moving
month	value(A)	forecast(F)	(A-F)^2
1	25
2	14
3	21
4	13	20	49
5	20	16	16
6	24	18	36
7	16	19	9
		average	27.5

MSE =27.5

  forecast for month 8 =20

c)

month	value(A)	forecast(F)	(A-F)^2
1	25
2	14	25.00	121.00
3	21	22.80	3.24
4	13	22.44	89.11
5	20	20.55	0.30
6	24	20.44	12.66
7	16	21.15	26.56
		average	42.15

MSE =42.15

  forecast for month 8 =20.12

d)

The three-month moving average provides a better forecast since it has a smaller MSE than the exponential smoothing using α = 0.2.