Question: Under MSE loss function, choose which model among the three has the lowest loss. Consider an alternative and simpler forecast that is calculated by averaging

Under MSE loss function, choose which model among the three has the lowest loss. Consider an alternative and simpler forecast that is calculated by averaging the last six observations (simple smoothing technique that does not require estimation). By implementing the test of unconditional predictability, explain which forecast is preferred.

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From Table 8 we choose AR6 as the preferred model because it delivers the lowest average loss under the MSE loss function mean square error 2815 We al... View full answer

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