Question

Please provide steps so I can do them as well.

Consider the following time series data:

Month	1	2	3	4	5	6	7
Value	23	12	21	11	18	22	14

(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?
	- Select your answer -NaïveAll data average

Answer 1

a)

period	demand	forecast	forecast error=demand value-forecast value	absolute forecast error
t	Dt	Ft	et=Dt-Ft	| et |
1	23
2	12	23	-11.00	11.00
3	21	12	9.00	9.00
4	11	21	-10.00	10.00
5	18	11	7.00	7.00
6	22	18	4.00	4.00
7	14	22	-8.00	8.00

MSE=   Σ(et)²/n =    71.8
forecast for week 8 = 14

b)

period	demand	forecast	forecast error=demand value-forecast value	absolute forecast error
t	Dt	Ft	et=Dt-Ft	| et |
1	23
2	12	23	-11.00	11.00
3	21	17.5	3.50	3.50
4	11	18.6666667	-7.67	7.67
5	18	16.75	1.25	1.25
6	22	17	5.00	5.00
7	14	17.8333333	-3.83	3.83
8		17.286

MSE=   Σ(et)²/n =    38.9

forecast for week 8 = 17.3

c)

all data average provides better forecast because MSE is smaller