Forecasting Models: Moving Average, Weighted Moving Average, Exponential Smoothing

B D E G H 1 2 Unemployment rates during an 11 year period are shown in the table. 3 4 5 a) Find 4-year moving averages for year 5 through year 12. What is the forecast for the unemployment rate in Year 12? 6 b) Find weighted moving averages with three periods for year 4 through year 12. What is the forecast for the unemployment rate in Year 12? Assume that the data value in the most recent year is given a weight of 4 and data value in the second most recent year are given a weight of 3 and the data in the third most recent year are given a weight of 1. 7 8 Unemployment Rate (%) 9 Year 1 6.3 10 Year 2 6 11 Year 3 6.1 12 Year 4 8.3 13 Year 5 8.1 14 Year 6 7.5 15 Year 7 7.3 16 Year 8 7.1 17 Year 9 6.9 18 Year 10 6.9 19 Year 11 7 c) Use exponential smoothing with a smoothing constant a = 0.6 to develop forecasts for year 2 through year 12. What is the forecast for the unemployment rate in Year 12? Assume that the initial forecast for Year 1 is 6,4%). d) Report the Mean Absolute Deviation (MAD) for each model (in part a), part b) and part c)). Based on MAD criteria, which model would be more accurate in predicting the unemployment rate for Year 12? Why