Forecasting evolution techniques, Business Economics

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Following are the number of victories for the Blue Sox and the hotel occupancy rate for the past eight years.  You have been asked to test three forecasting methods to see which method provides a better forecast for the Number of Blue Sox wins.

Year

Number of Blue Sox Wins

Occupancy Rate

1

70

78%

2

67

83

3

75

86

4

87

85

5

87

89

6

91

92

7

89

91

8

85

94

 

For the following, calculate all forecasts to one decimal place (example, 93.2%)

You are asked to forecast the Number of Blue Sox Wins for Year 9.  Although you believe there might be a linear regression relationship, your boss has told you to only consider the following three forecasting methods:

  • 2-period moving average,
  • 3-period weighted moving average, unfortunately, you spilled coffee on the paper with the weights for each period. You can tell that the weights for the most recent and the third most recent period are 0.6 and 0.1 respectively. The weight for the second most recent period would be consistent with the weighted moving average method we have studied in class.
  • exponential smoothing with α = 0.3 and the forecast for Year 3 for Number of Blue Sox Wins is 70.0.

a) What is the forecast from each of these three methods for Year 9?

b)  Using one of the forecast evaluation techniques that we have used as part of the homework assignment for this topic and using the forecasts for Years 4 through 8, which forecasting method do you recommend using for preparing your forecast for Year 9?  Why?

c)  Based on your analysis in b), would you recommend using the forecasting method and the resulting forecast that you selected in b)?  Identify the key factors that need to be considered in answering this question.


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