Forecast the data for 2000 with exponential smoothing with w 0 3 and w 0 7 Is this a better forecast than the moving average Compare RMSEs for moving average and exponential forecast to answer Is this a better forecast than the moving average Use 166 63, the mean of all 36 months, as the initial forecast for Jan 1998 for both exponential smoothing forecast Time CPI forecast(w 0 3) (A F) 2 forecast(w 0 7) (A F) 2 Jan 98 161 0 166 63 166 63 Feb 98 161 1 164 94 Mar 98 161 4 163 79 Apr 98 161 8 163 07 May 98 162 3 162 69 Jun 98 162 2 162 57 Jul 98 162 1 162 46 Aug 98 162 6 162 35 Sep 98 162 6 162 43 Oct 98 163 2 162 48 Nov 98 163 4 162 70 Dec 98 163 5 162 91 Jan 99 164 2 163 08 Feb 99 164 6 163 42 Mar 99 165 0 163 77 Apr 99 166 6 164 14 May 99 166 2 164 88 Jun 99 165 4 165 28 Jul 99 165 8 165 31 Aug 99 166 3 165 46 Sep 99 167 2 165 71 Oct 99 167 2 166 16 Nov 99 167 1 166 47 Dec 99 167 3 166 66 Jan 00 167 9 166 85 1 10 Feb 00 169 3 167 17 4 55 Mar 00 170 7 167 81 8 37 Apr 00 170 6 168 67 3 71 May 00 171 1 169 25 3 41 Jun 00 171 0 169 81 1 42 Jul 00 171 7 170 16 2 36 Aug 00 172 2 170 63 2 48 Sep 00 173 3 171 10 4 85 Oct 00 173 8 171 76 4 17 Nov 00 173 5 172 37 1 28 Dec 00 173 5 172 71 0 62 MSE 3 19 RMSE 1 79

Question: Forecast the data for 2000 with exponential smoothing with w = 0.3 and w = 0.7. Is this a better forecast than the moving average?

Forecast the data for 2000 with exponential smoothing with w = 0.3 and w = 0.7. Is this a better forecast than the moving average? Compare RMSEs for moving average and exponential forecast to answer "Is this a better forecast than the moving average" ? Use 166.63, the mean of all 36 months, as the initial forecast for Jan. 1998 for both exponential smoothing forecast.

Time	CPI	forecast(w=0.3)	(A-F)^2	forecast(w=0.7)	(A-F)^2
Jan-98	161.0	166.63		166.63
Feb-98	161.1	164.94
Mar-98	161.4	163.79
Apr-98	161.8	163.07
May-98	162.3	162.69
Jun-98	162.2	162.57
Jul-98	162.1	162.46
Aug-98	162.6	162.35
Sep-98	162.6	162.43
Oct-98	163.2	162.48
Nov-98	163.4	162.70
Dec-98	163.5	162.91
Jan-99	164.2	163.08
Feb-99	164.6	163.42
Mar-99	165.0	163.77
Apr-99	166.6	164.14
May-99	166.2	164.88
Jun-99	165.4	165.28
Jul-99	165.8	165.31
Aug-99	166.3	165.46
Sep-99	167.2	165.71
Oct-99	167.2	166.16
Nov-99	167.1	166.47
Dec-99	167.3	166.66
Jan-00	167.9	166.85	1.10
Feb-00	169.3	167.17	4.55
Mar-00	170.7	167.81	8.37
Apr-00	170.6	168.67	3.71
May-00	171.1	169.25	3.41
Jun-00	171.0	169.81	1.42
Jul-00	171.7	170.16	2.36
Aug-00	172.2	170.63	2.48
Sep-00	173.3	171.10	4.85
Oct-00	173.8	171.76	4.17
Nov-00	173.5	172.37	1.28
Dec-00	173.5	172.71	0.62


		MSE	3.19
		RMSE	1.79

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To forecast the data for the year 2000 using exponential smoothing and compare it to the moving average forecast we need to complete a few calculations Step 1 Understanding Exponential Smoothing Exponential smoothing is a technique used for forecasting time series data by giving more weight to more recent observations The forecast formula is given by Ft w times At1 1 w times Ft1 Where Ft is the forecast for the current period At1 is the actual value from the last period Ft1 is the forecast from the last period w is the smoothing factor 0 w 1 Given Initial forecast for Jan 1998 16663 Smoothing factors w 03 and w 07 Step 2 Calculate Exponential Smoothing with w 07 Ill extend the calculation ... View full answer

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