Question

Consider the following time series data.

Month	1	2	3	4	5	6	7
Value	21	12	21	13	18	21	14

Round your answers to two decimal places.

a. Compute MSE using the most recent value as the forecast for the next period.
MSE=____________

What is the forecast for month 8?
_______________

b. Compute MSE using the average of all data available as the forecast for the next period.
MSE=____________

What is the forecast for month 8?
________________

Answer 1

a) recent value as forecast = naive forecast

Mean squared error = Mean (squared error) = 51.5

Forecast for month 8 = 14

b) Average of all data available as forecast = average of all values before that particular week

Mean squared error = Mean (squared error) = 26.2095

Forecast for month 8 = 17.14