Exercises2

1. A forecasting method used to predict can opener sales applies the following set of weights to the last
5 periods of data: 0.1, 0.1, 0.2, 0.2, 0.4 (with 0.4 being applied to the most recent observation).
Observed values of can sales are
Period 1 2 3 4 5 6 7 8
Observation 18 22 26 33 14 28 30 52
Determine the following:
a) the one step ahead forecast for period 9
b) the one step ahead forecast that was made for period 6
SOLUTIONS:
a) (33)(.1) + (14)(.1) + (28) (.2) + (30)(.2) + (52)(.4) = 37.1

m
b) (18)(.1) + (22)(.1) + (26)(.2) + (33)(.2) + (14)(.4) = 21.4

er as
co
eH w
2. Two forecasting methods have been used to evaluate the same economic time series. The results are:

o.
Forecast Method 1 Forecast Method 2 Realized Value of the Series
rs e
ou urc
223 210 256
289 320 340
o

430 390 375

aC s

134 112 110

vi y re

190 150 225

550 490 525
ed d

Compare the effectiveness of these methods by computing the MSE, the MAD, and the MAPE. Do each of
ar stu

these measures of forecasting accuracy indicate that the same forecasting technique is the best? If not, why?
SOLUTION:
sh is

13 Fcst 1 Fcst 2 Demand Err 1 Err 2 Er1^2 Er2^2 |Err1|

223 210 256 33 46 1089 2116 33

Th

289 320 340 51 20 2601 400 51

430 390 375 -55 -15 3025 225 55

134 112 110 -24 -2 576 4 24

190 150 225 35 75 1225 5625 35

550 490 525 -25 35 625 1225 25

1523.5 1599.166 37.16666

(MSE1 (MSE2) (MAD1)

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 Err2 e1/D*100 e2/D100

46 12.89062 17.96875

20 15.0000 5.88253

15 14.66667 4.00000

2 21.81818 1.81818

75 15.55556 33.33333

35 4.761905 6.66667

32.16666 14.11549 11.61155

(MAD2) (MAPE1) (MAPE2)

3. Determine the one-step-ahead forecast for the demand for January 2014 using 3-, 6- and 12-month

m
moving averages.

er as
co
Month Demand Month Demand

eH w
January 89 July 223
February 57 August 286

o.
March
rs e
144 September 212
ou urc
April 221 October 275
May 177 November 188
June 280 December 312
o
aC s

SOLUTION:
vi y re

MA (3) forecast: 258.33

MA (6) forecast: 249.33
MA (12) forecast: 205.33
ed d
ar stu

4. Compute the one-step-ahead 3-month and 6-month moving average forecasts for July through
December. What effect does increasing N from 3 to 6 have on the forecasts?
(use data from problem 3)
sh is

Month Demand MA(3) MA(6)

Th

July 223 226.00 161.33

August 286 226.67 183.67

September 212 263.00 221.83

October 275 240.33 233.17

November 188 257.67 242.17

December 312 225.00 244.00

MA (6) Forecasts exhibit less variation from period to period.

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