Business Analytics - Forecasting

Assignment 1a Questions

Question 1

Determine the error for each of the following forecasts. Then, calculate MAD and MSE.

Period   Value   Forecast Error

      1        202       —             —

      2        191      202

      3        173      192

      4        169      181

      5        171      174

      6        175      172

      7        182      174

      8        196      179

      9        204      189

     10       219      198

     11       227      211

Question 2

The U.S. Census Bureau publishes data on factory orders for all manufacturing, durable goods, and nondurable goods industries. Shown here are factory orders in the United States over a 13-year period ($ billion).

First, use the data to develop forecasts for years 6 through 13 using a 5-year moving average. Unit 5 [GB513: Business Analytics]

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Then, use the data to develop forecasts for years 6 through 13 using a 5-year weighted moving average. Weight the most recent year by 6, the previous year by 4, the year before that by 2, and the other years by 1.

Answer the following questions:

a) What is the forecast for year 13 based on the 5-year moving average?

b) What is the forecast for year 13 based on the 5-year weighted moving average?

c) What is the MAD for the moving average forecast?

d) What is the MAD for the weighted moving average forecast?

e) Which forecasting model is better?