Develop three-month and four-month moving averages for this time series.

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.

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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.

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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

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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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