The monthly market shares of General Electric Company for 12 consecutive months follow. Develop three-month and four-month moving averages for this time series. Comparing the three-month and the four-month moving average, which one provide the better forecasts based on MSE? Explain your reasoning.
Month Market Shares
1 23.39
2 23.56
3 23.02
4 23.03
5 23.60
6 23.37
7 23.21
8 23.40
9 23.31
10 23.94
11 23.39
12 23.50
The following data shows the quarterly profit (in thousands of dollars) made by a particular company in the past 3 years.
Year Quarter Profit ($1000s)
1 1 45
1 2 51
1 3 72
1 4 50
2 1 49
2 2 45
2 3 79
2 4 54
3 1 42
3 2 58
3 3 70
3 4 56
a. Use α = 0.3 to compute the exponential smoothing values for the time series. Compute MSE and the forecast of profit (in $1000s) for the next quarter.
b. Compare the three-period moving average forecast with the exponential smoothing forecast using α = 0.3. Which appears to provide the better forecast based on MSE?
Consider the following quarterly time series.
Quarter Year 1 Year 2 Year 3
1 923 1,112 1,243
2 1,056 1,156 1,301
3 1,124 1,124 1,254
4 992 1,078 1,198
a. Construct a time series plot. What type of pattern exists in the data?
b. Use a multiple regression model with dummy variables as follows to develop an equation to account for seasonal effects in the data. Qtr1 = 1 if quarter 1, 0 otherwise; Qtr2 = 1 if quarter 2, 0 otherwise; Qtr3 = 1 if quarter 3, 0 otherwise.
c. Compute the quarterly forecasts for next year based on the model developed in part (b).
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