Suppose That You Are Using the Four-Period Simple Moving Average

question 52

Multiple Choice

Suppose that you are using the four-period simple moving average method to forecast sales, and sales have been decreasing by 10% every period. How will your forecasts perform?

• A) Forecasts will be lower than actual.
• B) Forecasts will be higher than actual.
• C) Forecasts will equal actual.
• D) Forecasts will be increasing.
• E) Forecasts will be decreasing by 2.5% every period.

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Definitions:

Biased Estimates

Estimates that are systematically off-target in a certain direction due to errors in methodology or sample selection.

Absolute Value

The non-negative value of a number without regard to its sign; for example, the absolute value of both -5 and 5 is 5.

Variance

A statistical measure that represents the degree of spread or variability of a data set, by calculating the average of the squared differences from the mean.

Standard Deviation

A measure of the dispersion or variability within a dataset, indicating how much the individual data points deviate from the mean.