Question

Consider the time-series data in columns A and B on the below (picture).

Week (A)	Value (B)
1	24
2	13
3	20
4	12
5	19
6	23
7	15

a. Using the naive method, develop a forecast for this time series. Compute MSE and MAPE. Show the forecast for week 8.

b. Using all previous values, develop a forecast for this time series. Compute MSE and MAPE. Show the forecast for week 8.

c. Develop a three-week moving average for this time series. Compute MSE and MAPE. Show the forecast for week 8.

d. Compare the MSE and MAPE for all three forecasting methods. Which forecasting method would you recommend based on these error values?

Answer 1

ANSWER::

a) Naive method,

A	B	C	D =IF(C3=0,0,(B3/C3)-1)
Week	Value	Naïve Forcast	% Diff
1	24
2	13	24	-0.46
3	20	13	0.54
4	12	20	-0.40
5	19	12	0.58
6	23	19	0.21
7	15	23	-0.35
8		15

b)

A	B	C	D =IF(C3=0,0,(B3/C3)-1)	E=ABS(B3-C3)	F =(B3-C3)*(B3-C3)	G=ABS((B3-C3)/B3)
Week	Value	Naïve Forcast	% Diff	MAD	MSE	MAPE
1	24
2	13	24	-0.46	11	121	0.85
3	20	13	0.54	7	49	0.35
4	12	20	-0.40	8	64	0.67
5	19	12	0.58	7	49	0.37
6	23	19	0.21	4	16	0.17
7	15	23	-0.35	8	64	0.53
8		15

MAD	(11+7+8+7+4+8)/6	7.50
MSE	(121+49+64+49+16+64)/6	60.50
MAPE	(0.85+0.35+0.67+0.37+0.17+0.53)/6	48.97

c)

A	B	C =AVERAGE(B3:B5)	D =(B5-C5)	E=abs(Error)	F= D5*D5	G =E5/B5
Week	Value	3 Week MA	Error	abs(Error)	Error^2	MAPE
1	24	-
2	13	-
3	20	19	1	1	1	5%
4	12	15	-3	3	9	25%
5	19	17	2	2	4	11%
6	23	18	5	5	25	22%
7	15	19	-4	4	16	27%
8		19

MSE	(1+9+4+25+16)/5	11.00
MAPE	(5+25+11+22+27)/5	18%

d)

3 week moving averages method would be recommed since is less MSE 11 only and MAPE 18%

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