The file S12_73.xlsx contains data on monthly U.S. permits for new housing units (in thousands of houses).
a. Using Winters’ method, find values of α, β, and γ that yield an RMSE as small as possible. Does this method track the housing crash in recent years?
b. Although we have not discussed autocorrelation for smoothing methods, good forecasts derived from smoothing methods should exhibit no substantial autocorrelation in their forecast errors. Is this true for the forecasts in part a?
c. At the end of the observed period, what is the forecast of housing sales during the next few months?