Question: Consider the time series data shown in Chapter 4, Table E4.2. a. Fit an appropriate ARIMA model to the first 40 observations of this time

Consider the time series data shown in Chapter 4, Table E4.2.

a. Fit an appropriate ARIMA model to the first 40 observations of this time series.

b. Make one-step-ahead forecasts of the last l 0 observations. Determine the forecast errors.

c. In Exercise 4.4 you used simple exponential smoothing with A = 0.2 to smooth the first 40 time periods of this data and make forecasts of the last I 0 observations. Compare the ARIMA forecasts with the exponential smoothing forecasts. How well do both of these techniques work?

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