Econometrics

Problem -1 For the moving average problem below, determine (in the Excel file):

1. (30 points)

1. The Moving Average Forecasting values
2. MAD and MSE

B) (45 points)

Determine quarterly seasonal factors and perform all the above steps using the seasonal factors.

(hint: to save time, you can copy and paste the entire table into Excel)

Year	Quarter	TRUE
Value	Moving Average Value
		5,005					n=
		4,822
		5,700
		5,300
		5,510
		7,300					Mean Absolute Deviation
		6,490					MAD =
		4,810
		5,800					Mean Square Error
		6,850					MSE =
		6,520
		7,050

Problem – 2 (5 points each):

1. The last-value forecasting method is most useful when conditions are stable over time.
   ( T / F )
2. An exponential smoothing forecasting method with a small value of smoothing constant is very responsive to changes in the time-series data. ( T / F )
3. The forecasting method which uses grass-roots information to achieve a forecast is:
   a. sales force composites.
   b. consumer surveys.
   c. the Delphi method.
   d. time-series analysis.
   e. executive opinions.
4. Given forecast errors of 8, 4, and 9, what is the mean absolute deviation?
   a. 3.
   b. 4.
   c. 7.
   d. 6.
   e. 12.
5. Given an actual demand of 60, a previous forecast of 50, and an alpha of 0.7, what would be the forecast for its next period using the exponential smoothing method?
   a. 57.
   b. 61.
   c. 63.
   d. 65.
   e. 67.

Bonus: (6 points) Please write the answers on a separate tab in same the Excel file.

1. MSE emphasizes smaller values of the errors? ( T / F )
2. What do we mean by time series?
3. Assuming market conditions are the same, how can the MSE values help you decide which forecasting method is better?