Juan was asked by his boss to develop a forecast model for the WTI Spot crude oil price. Juan was eager to show off his regression skills and was confident he could build a model that would accurately predict the WTI spot price. After receiving a file of the Cushing OK WTI Spot Price, he got to work. Juan started by first plotting the time series data in Excel and determining if there were any trends or seasonality. He decided to start by building several models.

As Juan was reviewing the modeling results, his colleague, Mary, commented that he might want to try other forecasting methods that are simpler and may provide better forecasts. Mary suggested to try Moving Average and Exponential Smoothing models to try and generate a more accurate forecast

Day	Weekly Cushing OK WTI Spot Price FOB Dollars per Barrel
5/26/1995	19.37
5/19/1995	19.98
5/12/1995	19.74
5/5/1995	20.24
4/28/1995	20.29
4/21/1995	20.26
4/14/1995	19.53
4/7/1995	19.43
3/31/1995	19.12
3/24/1995	18.69
3/17/1995	18.13
3/10/1995	18.27
3/3/1995	18.5
2/24/1995	18.75
2/17/1995	18.55
2/10/1995	18.42
2/3/1995	18.5
1/27/1995	18.34
1/20/1995	18.45
1/13/1995	17.55
1/6/1995	17.62
12/30/1994	17.71
12/23/1994	17.1
12/16/1994	16.86
12/9/1994	16.99
12/2/1994	17.78
11/25/1994	17.73
11/18/1994	17.51
11/11/1994	18.25
11/4/1994	18.69
10/28/1994	17.93
10/21/1994	17.35
10/14/1994	17.37
10/7/1994	18.13
9/30/1994	17.83
9/23/1994	17.38
9/16/1994	16.93
9/9/1994	17.65
9/2/1994	17.52
8/26/1994	17.23
8/19/1994	17.85
8/12/1994	18.88
8/5/1994	20.09
7/29/1994	19.66
7/22/1994	19.39
7/15/1994	20.16
7/8/1994	19.39
7/1/1994	19.16
6/24/1994	19.8
6/17/1994	19.61
6/10/1994	18.26
6/3/1994	18.24
5/27/1994	18.14
5/20/1994	18.21
5/13/1994	17.93
5/6/1994	17.2
4/29/1994	16.93
4/22/1994	17.02
4/15/1994	16.07
4/8/1994	15.65
4/1/1994	14.44
3/25/1994	15.15
3/18/1994	14.82
3/11/1994	14.24
3/4/1994	14.68
2/25/1994	14.44
2/18/1994	14.13
2/11/1994	14.87
2/4/1994	15.76
1/28/1994	15.34
1/21/1994	15.02
1/14/1994	14.67
1/7/1994	15.03
12/31/1993	14.21
12/24/1993	14.4
12/17/1993	14.31
12/10/1993	14.68
12/3/1993	15.21
11/26/1993	16.08
11/19/1993	16.75
11/12/1993	16.71
11/5/1993	17.29
10/29/1993	17.37
10/22/1993	18.12
10/15/1993	18.57
10/8/1993	18.46
10/1/1993	18.33
9/24/1993	17.67
9/17/1993	16.94
9/10/1993	16.96
9/3/1993	18.1
8/27/1993	18.49
8/20/1993	17.84
8/13/1993	17.87
8/6/1993	17.67
7/30/1993	18.18
7/23/1993	17.54
7/16/1993	17.72
7/9/1993	18.02
7/2/1993	18.61
6/25/1993	18.52
6/18/1993	18.76
6/11/1993	19.43
6/4/1993	19.95
5/28/1993	19.84
5/21/1993	19.43
5/14/1993	20.06
5/7/1993	20.47
4/30/1993	20.3
4/23/1993	19.95
4/16/1993	20.28
4/9/1993	20.37
4/2/1993	20.44
3/26/1993	20
3/19/1993	20.14
3/12/1993	20.45
3/5/1993	20.69
2/26/1993	20.4
2/19/1993	19.51
2/12/1993	20.13
2/5/1993	20.22
1/29/1993	19.9
1/22/1993	18.61
1/15/1993	18.62
1/8/1993	19
1/1/1993	19.63
12/25/1992	19.91
12/18/1992	19.38
12/11/1992	19.01
12/4/1992	19.38
11/27/1992	20.16
11/20/1992	20.35
11/13/1992	20.37
11/6/1992	20.52
10/30/1992	20.95
10/23/1992	21.58
10/16/1992	22.25
10/9/1992	21.9
10/2/1992	21.81
9/25/1992	21.71
9/18/1992	22.21
9/11/1992	21.94
9/4/1992	21.66
8/28/1992	21.43
8/21/1992	21.39
8/14/1992	21.18
8/7/1992	21.34
7/31/1992	21.95
7/24/1992	21.95
7/17/1992	21.58
7/10/1992	21.48
7/3/1992	22.03
6/26/1992	22.68
6/19/1992	22.26
6/12/1992	22.35
6/5/1992	22.38
5/29/1992	21.98
5/22/1992	20.49
5/15/1992	20.8
5/8/1992	20.86
5/1/1992	20.63
4/24/1992	20.06
4/17/1992	20.06
4/10/1992	20.43
4/3/1992	19.73
3/27/1992	19.09
3/20/1992	19.1
3/13/1992	18.76
3/6/1992	18.55
2/28/1992	18.51
2/21/1992	18.62
2/14/1992	19.49
2/7/1992	19.42
1/31/1992	19.05
1/24/1992	18.66
1/17/1992	18.81
1/10/1992	18.41
1/3/1992	19.11
12/27/1991	18.68
12/20/1991	19.2
12/13/1991	19.64
12/6/1991	20.55
11/29/1991	21.49
11/22/1991	22.04
11/15/1991	22.57
11/8/1991	23.47
11/1/1991	23.32
10/25/1991	23.46
10/18/1991	23.82
10/11/1991	23.08
10/4/1991	22.41
9/27/1991	22.24
9/20/1991	21.85
9/13/1991	21.54
9/6/1991	21.84
8/30/1991	21.98
8/23/1991	21.99
8/16/1991	21.44
8/9/1991	21.5
8/2/1991	21.46
7/26/1991	21.4
7/19/1991	21.91
7/12/1991	21.43
7/5/1991	20.8
6/28/1991	20.21
6/21/1991	20.08
6/14/1991	19.84
6/7/1991	20.63
5/31/1991	21.21
5/24/1991	21.04
5/17/1991	20.95
5/10/1991	21.69
5/3/1991	21.23

QUESTIONS:

1. Generate Moving Averages of 2, 3, 5, and 10 weeks and forecast WTI for the next period.

2. Calculate the MAD for each Moving Average model and comment on which is the best model among these.

3. Generate Exponential Smoothing models with alpha of 0.2, 0.4, 0.6 and 0.8. Forecast WTI for the next period.

4. Calculate the MAD for each Exponential Smoothing model and comment on which is the best model among these.

5. Plot the Moving Average models with the actual WTI on one chart AND on a separate chart plot the Exponential Smoothing models with actual WTI.

Answer rating: 100% (QA)

1 Moving Averages To calculate the moving averages well use the specified window sizes 2 3 5 and 10 weeks and forecast the WTI spot price for the next period Here is the calculation for each moving av... View the full answer