Question

1. 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.

Answer 1

Answer:

MSE for 3-month MA = 0.0790

for 4-month, it is 0.066

Hence, 4-month MA is better.

Explanation:

In statistics, the mean squared error, MSEor mean squared deviation (MSD) of an estimator that is of a procedure for estimating an unobserved quantity, measures the average of the squares of the errors, that is, the average squared difference between the estimated values and the actual value.

This is used to ascertain the preferred or better forecast from 2 or more given parameters.

Kindly check the attachment for the step by step explaination of the MSE forecast.