Question

The values of Alabama building contracts (in millions of dollars) for a 12-month period follow:240 350 230 260 280 320 220 310 240 310 240 230a. Construct a time series plot. What type of pattern exists in the data?b. Compare a three-month moving average forecast with an exponential smoothing forecast. Use alpha =0.2 Which provides the better forecasts based on MSE?c. What is the forecast for the next month?

Answer 1

Check the explanation

Explanation:

Kindly check the attached image below for the full explanation.

Based on the preceding MBE values in the attached image below, the 3-Month moving averages appear better; however, exponential smoothing was penalized by including month 2 which was difficult for any method to forecast; using only the errors for months 0 to 12, the MBE for exponential smoothing is

MSE
`(\alpha = 2)` = 14694/9= 1632.72

exponential smoothing was better considering months 4 to 12.