The Following Times Series Shows the Demand for a Particular

question 28

Essay

The following times series shows the demand for a particular product over the past 10 months.
a. Construct a time series plot. What type of pattern exists in the data?
b. Develop a three-month moving average for this time series. Compute MSE and a forecast for month 11.

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Definitions:

Homoscedasticity

A term in statistics describing a situation where all random variables across a dataset have the same finite variance.

Normality Of Errors

An assumption in many statistical models that the errors in the predictions are normally distributed.

Independence Of Errors

Pertains to a condition in statistical analyses where the errors of a model’s predictions are not correlated with each other.

First-Order Autocorrelation

The correlation between sequential observations in a time series, specifically between each observation and its immediate predecessor.