Exam 23: Time-Series Analysis and Forecasting

In determining monthly seasonal indexes, the first step is to construct a centred moving average with a period of:

A time series regression equation for a surfboard manufacturing company in Australia is given below: Y = 35 + 4Q₁ + 0.5Q₃ + 8Q₄ + 3t With t in quarters and the origin is December 2010 and Q₁ is the indicator variable for March, Q₃ is the indicator variable for September and Q₄ is the indicator variable for December. Which of the following statements is correct regarding the coefficient of Q₄?

Two forecasting models were used to predict the future values of a time series. These are shown in the following table, together with the actual values. Forecast Value Actual Value Model 1 Model 2 8.2 7.7 7.6 7.8 8.5 8.2 7.0 8.5 7.6 9.6 9.0 10.3 Compute MAD and SSE for each model to determine which was more accurate.

Time-series forecasting with exponential smoothing uses the following formula:` $S _ { t } = w y _ { t } + ( 1 - w ) S _ { t - 1 }$ . where $S _ { t }$ is the exponentially smoothed time series at time t, $y _ { t }$ is the value of the time series at time t, and w is the smoothing constant. The forecast value at time t + 1, where w = 0.3, is given by:

Which method would you recommend in selecting the appropriate forecasting model if avoiding large errors is extremely important?