Problem 53 Consider the following time series data Following

Problem 5-3

Consider the following time series data.

Following are the results using 2 different methods as the forecast for the next week:

Which method appears to provide the more accurate forecasts for the historical data?

- Select your answer -Naïve method (most recent value)Average of all the historical dataItem 1

Explain.

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Solution

The most accurate forecast is given by the Average of all the historical data. This is because error terms are smaller for it than the Naive method.