Question

# Consider the following time series data: Month 1 2 3 4 5 6 7 Value 25...

Consider the following time series data:

 Month 1 2 3 4 5 6 7 Value 25 14 19 11 20 22 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? - Select your answer -NaïveAll data averageItem 5

a)

 month value Forecast |error|^2 1 25 2 14 25 121 3 19 14 25 4 11 19 64 5 20 11 81 6 22 20 4 7 16 22 36 total 331 average 55.17 MSE = 55.2 forecast = 16.0

b)

 month value Forecast (error)^2 1 25 2 14 25.00 121.00 3 19 19.50 0.25 4 11 19.33 69.44 5 20 17.25 7.56 6 22 17.80 17.64 7 16 18.50 6.25 total 222.15 average 37.02 MSE = 37.0 forecast = 18.1

c)

since MSE for All data average is smaller, this one is better

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