Question: Under the MSE loss function, choose the best model of the two. Calculate an alternative forecast such as ft,1 = (yt + yt-3)/2. Compare this

Under the MSE loss function, choose the best model of the two. Calculate an alternative forecast such as ft,1 = (yt + yt-3)/2. Compare this smoothed forecast with that of your best model by implementing the test of unconditional predictability. Which forecast is preferred? Explain your answer.

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Under the MSE loss function the sample average loss of the AR3 model is 0861715 and of ARMA22 model ... View full answer

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