Calculate mean absolute deviation for fit of forecast values

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Repeat given Exercise, but for a second-order autoregressive forecasting equation. Compare the MAD values for forecasts generated by the two equations and indicate which one is the better fit to these data.

Exercise
Over the past 20 years, inventory carrying costs for a large tire manufacturing facility have been as follows. Data are in thousands of dollars. Construct a first-order autoregressive forecasting equation for these data, calculate the mean absolute deviation (MAD) for the fit of the forecast values to the actual values, then use the equation to forecast inventory carrying costs for time period 21.

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Reference no: EM131409794

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