Question

Considering the following time series data:

Week	1	2	3	4	5	6	7	8	9	10
Sales	8	11	14	19	16	10	8	12	14	16

Compute the naïve forecast and the three-week Moving Average and evaluate the forecast accuracy considering the Mean Absolute Error (MAE), Mean Squared Error (MSE) and the Mean Absolute Percentage Error (MAPE) for each of these two predictions. Compare both of them and determine which is the best model

Answer 1

Solution:

Since the MAD, MSE, and MAPE of Naive forecast is less than the MAD, MSE, and MAPE of three years moving average, therefore the Naive model is best