Question

Consider the following time series data.

Month	1	2	3	4	5	6	7
Value	21	10	20	11	20	23	16

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?

a.The average of all data avaliable

OR

b. The most recent value

Answer 1

a)

Month	Value(A)	forecast(F)	(A-F)^2
1	21
2	10	21	121
3	20	10	100
4	11	20	81
5	20	11	81
6	23	20	9
7	16	23	49
		average	73.5

Mean squared error is =73.5

forecast for month 8 =16

b)

Month	Value(A)	forecast(F)	(A-F)^2
1	21
2	10	21	121
3	20	15.5	20.25
4	11	17	36
5	20	15.5	20.25
6	23	16.4	43.56
7	16	17.5	2.25
		average	40.55

Mean squared error is =40.55

forecast for month 8 =17.29

c)

The average of all data avaliable