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BUS 173 Lecture 12

WMA. BUS 173 Lecture 12. After the second mid, we have looked into: Simple Average Regression Moving Average 3 period 4 period 5 period Accuracy check MAD/MAPE MSE. So far…. You have decided to use Simple moving average, for 3 periods. Calculate the MSE and MAPE for the method.

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BUS 173 Lecture 12

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  1. WMA BUS 173 Lecture 12

  2. After the second mid, we have looked into: • Simple Average • Regression • Moving Average • 3 period • 4 period • 5 period • Accuracy check • MAD/MAPE • MSE So far…

  3. You have decided to use Simple moving average, for 3 periods. Calculate the MSE and MAPE for the method. Calculate the forecast for the next three days

  4. Different periods have different weights • Normally the recent period is given the higher weights. • Stock Price • National Income • Weather Forecasts Weighted Moving Average (WMA)

  5. Determining weights and periods: • Depends on the person who is calculating the forecast • Normally 3 – 5 periods are chosen • To carry out a proper WMA forecasting, you need to have a dialogue with the decision maker WMA - 2

  6. This is the formula for the three period moving average Formulae for WMA

  7. Example

  8. Focus on Recent Values • Recent one has 50% • T -2 has a weight of 30% • T -3 has a weight of 20% • Further focus on Recent Values • Recent one has 70% • T – 2 has a weight of 20% • T – 3 has a weight of 10% • How do you determine which forecast is the best? Weights to Use

  9. Thank You End of Lecture

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