Question

Month	1	2	3	4	5	6	7
Value	22	13	18	12	18	23	14

Consider the time series data

b. Develop the three-month moving average forecasts for this time series. Compute MSE and a forecast for month 8 (to 2 decimals if necessary). Enter negative values as negative number.

Month	Time Series Value	Forecast	Forecast Error	Squared Forecast Error
			Totals

MSE
The forecast for month 8

c. Use a=.2 to compute the exponential smoothing forecasts for the time series. Compute MSE and a forecast for month 8 (to 2 decimals). Enter negative values as negative number.

Month	Time Series Value	Forecast	Forecast Error	Squared Forecast Error
			Totals

MSE
The forecast for month 8

d. Compare the three-month moving average approach with the exponential smoothing approach using a=.2 . Which appears to provide more accurate forecasts based on MSE?

e. Use a smoothing constant of a=.4 to compute the MSE. (to 2 decimals).

Does a smoothing constant of .4 or .2 appear to provide more accurate forecasts based on MSE?

Answer 1

b)

month	value	forecast	error	error^2
1	22
2	13
3	18
4	12	17.67	-5.67	32.11
5	18	14.33	3.67	13.44
6	23	16.00	7.00	49.00
7	14	17.67	-3.67	13.44
			total	108.00

MSE =27.00

forecast =18.33

c)

month	value	forecast	error	error^2
1	22
2	13	22.00	-9.00	81.00
3	18	20.20	-2.20	4.84
4	12	19.76	-7.76	60.22
5	18	18.21	-0.21	0.04
6	23	18.17	4.83	23.36
7	14	19.13	-5.13	26.35
		18.11	total	195.81

MSE =32.64

forecast =18.10

d)

The three-month moving average provides a better forecast since it has a smaller MSE

e)

MSE=32.08

0.4 is better