Question

# Consider the following time series data: Month 1 2 3 4 5 6 7 Value 24...

Consider the following time series data:

 Month 1 2 3 4 5 6 7 Value 24 13 20 12 18 23 16
 (a) Compute MSE using the most recent value as the forecast for the next period. If required, round your answer to one decimal place. What is the forecast for month 8? If required, round your answer to one decimal place. Do not round intermediate calculation. (b) Compute MSE using the average of all the data available as the forecast for the next period. If required, round your answer to one decimal place. Do not round intermediate calculation. What is the forecast for month 8? If required, round your answer to one decimal place. (c) Which method appears to provide the better forecast? (options are: naive, all data average)

a)

 month value Forecast |error| |error|^2 1 24 2 13 24 11 121 3 20 13 7 49 4 12 20 8 64 5 18 12 6 36 6 23 18 5 25 7 16 23 7 49 total 44 344 average 7.33 57.33 MSE = 57.3 forecast = 16.0

b)

 month value Forecast (error)^2 1 24 2 13 24.00 121.00 3 20 18.50 2.25 4 12 19.00 49.00 5 18 17.25 0.56 6 23 17.40 31.36 7 16 18.33 5.44 total 209.62 average 34.94 MSE = 34.9 forecast = 18.0

c)

all data average is better due to smallest MSE