BUSINESS ADMINISTRATION
BUSINESS ANALYTICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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tracking changes in a time series more quickly
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smoothing out random fluctuations
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providing a forecast when only the most recent time series are relevant
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eliminating the effect of seasonal variations in the time series
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Detailed explanation-1: -Answer and Explanation: The correct option is a) smoothing out random fluctuations. The moving average method is a technique through which a forecast is made using the average of the time series’ most recent data values to predict the future.
Detailed explanation-2: -The order of the moving average determines the smoothness of the trend-cycle estimate. In general, a larger order means a smoother curve.
Detailed explanation-3: -Hence, the 3-mth weighted moving average has the lowest MAD and is the best forecast method among the three.
Detailed explanation-4: -Moving averages are a simple and common type of smoothing used in time series analysis and time series forecasting. Calculating a moving average involves creating a new series where the values are comprised of the average of raw observations in the original time series.
Detailed explanation-5: -Answer and Explanation: Conditions where a simple exponential smoothing model is preferred over the moving averages method for forecasting: When experience says that the trend is more predictable using the more recent values than the older past values.