$1.$ Develop forecasts for month $11$ for the demand data in the table below using:

Month$$ Actual Sales

$164$

$284$

$391$

$497$

$5115$

$6135$

$7137$

$8144$

$9153$

$10171$

A$.$ A three period simple moving average and a five period simple moving average.

Compute the MAD, BIAS and MSE.

Which one works better $$ the three period or the five period moving average? Why?

How would you explain that based on the theory of forecasting? $($i$.$e$.$ don$$t just

mention that one method does better compared to the other because of a low MAD,

MSE, etc. Discuss the underlying reason$($s$)$ behind it$).$

Open Sheet$1$ of the template shell $($Excel file$)$ Practice Problems Module $6.$xls available on

Brightspace. Model this problem in Excel and answer the question above. Plot a graph

which shows how the demand and forecast varies with time period.

Answer:

B$.$ Exponential smoothing with alpha $=0\mathrm{.}3$ and alpha $=0\mathrm{.}7.$ Again, compute the MAD,

BIAS and MSE. Assume forecast for period $2=$ actual demand for period $1.$

Again, discuss which value of alpha works better? Why? Again, how would you

explain that based on the theory of forecasting? $($i$.$e$.$ don$$t just mention that one

method does better compared to the other because of a low MAD, MSE, etc. Discuss

the underlying reason$($s$)$ behind it$).$

Open Sheet$2$ of the template shell $($Excel file$)$ Practice Problems Module $6.$xls available on

Brightspace. Model this problem in Excel and answer the question above. Plot a graph

which shows how the demand and forecast varies with time period.

Answer:

C$.$ Linear Regression. How does the best Linear Regression forecast for wind turbines

you have developed compare with the best ES forecast for wind turbines from Part B$?$

Compare the forecasting methods with respect to MAD, BIAS and MSE. Also interpret the value of the adjusted R$2.$ Which forecasting model performs better?

Why?