Question 1

Consider the following time series data:

Month Value

24

13

20

12

19

23

15

a) Develop a three-week moving average for this time series. Compute MSE and a forecast for week 8.

b) Use a = 0.2 to compute the exponential smoothing values for the time series. Compute MSE and a forecast for week 8.

c) Compare the three-week moving average forecast with the exponential smoothing forecast using a = 0.2. Which appears to provide the better forecast based on MSE?

d) Use trial and error to find a value of the exponential smoothing coefficient a that results in a smaller MSE than what you calculated for a = 0.2.