1. Time Series Forecasting / Johnson & Johnson [9 points]

a. Briefly describe the main concept used in Exponential Smoothing models.

b. List three types of Exponential Smoothing models. Please draw a simple graph for each type, depicting what the forecasts would look like.

c. Briefly define a Moving Average process (use notation/equations if needed).

d. Briefly define an Autoregressive process (use notation/equations if needed).

e. We want to fit an ARIMA model to the historical data that is available for Johnson & Johnson stock. We estimate an ARIMA(0,1,2). Please write out the full equation for this model, using the coefficients from RStudio below.

sigma^2 =11.46:log likelihood =1178 AIC=2363.99 AIC =2364.08BIC=2380.4 Forecasts from ARIMA (0,1,2)