Question

Consider the following time series data.

Month	1	2	3	4	5	6	7
Value	22	14	20	11	20	22	14

Round your answers to two decimal places.

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

Mean squared error is

What is the forecast for month 8?

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

Mean squared error is

What is the forecast for month 8 ?

c. Which method appears to provide the better forecast?

- Select your answer -The average of all data available The most recent value

Answer 1

a) recent value as forecast = naive forecast

Mean squared error = Mean (squared error) = 55

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) =29.3102

Forecast for month 8 = 17.57

Average of all data available is best method for forecast because it has less MSE