Question

The values of Alabama building contracts (in millions of dollars) for a 12-month period are as follows.

Click on the datafile logo to reference the data.

240

350

230

260

280

320

220

310

240

310

240

230

(b)

Compare a three-month moving average forecast with an exponential smoothing forecast for α = 0.2. Which provides the better forecasts based on MSE?

Do not round your interim computations and round your final answers to two decimal places.

	Three-Month Moving Average	Exponential smoothing
MSE

(c)	What is the forecast for the next month using exponential smoothing with α = 0.2?
	If required, round your answer to two decimal places.

Answer 1

for three month moving average:

value(x)	forecast(f)	(x-f)^2
240
350
230
260	273.33	177.78
280	280.00	0.00
320	256.67	4011.11
220	286.67	4444.44
310	273.33	1344.44
240	283.33	1877.78
310	256.67	2844.44
240	286.67	2177.78
230	263.33	1111.11
	average	1998.77

for exponential smoothing:

value(x)	forecast(f)	(x-f)^2
240
350	240.00	12100.00
230	262.00	1024.00
260	255.60	19.36
280	256.48	553.19
320	261.18	3459.32
220	272.95	2803.41
310	262.36	2269.78
240	271.89	1016.73
310	265.51	1979.45
240	274.41	1183.85
230	267.53	1408.18
	average	2528.84

	Three-Month Moving Average	Exponential smoothing
MSE	1998.77	2528.84

b)

he forecast for the next month using exponential smoothing =260.02