Consider the following time series data. Month 1 2 3 4 5 6 7 Value 22 12 22 12 1

Question

Consider the following time series data. Month 1 2 3 4 5 6 7 Value 22 12 22 12 19 23 14 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 87 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? Select your answer The average of all data available The most recent value

Explanation / Answer

a) from most recent method:

a) mean squared error =74.33

forecast for month 8 =14

b)

average 37.26

Mean squared error =37.26

forecast for month 8 =17.71

c) average of all data values is better method due to low MSE

month value(A) forecast(F) (A-F)^2 1 22 2 12 22 100 3 22 12 100 4 12 22 100 5 19 12 49 6 23 19 16 7 14 23 81 14 total 446 average 74.33

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