Moving average forecasts with a smaller number of observations are more subject to random changes in the data than those with a larger number of observations.

Question

Quizplus · Accepted Answer

Moving averages are designed to smooth out fluctuations in the data, but with a smaller number of observations, there are fewer data points to smooth out any random changes. This makes the forecast more susceptible to being impacted by random fluctuations in the data. On the other hand, with a larger number of observations, there are more data points to smooth out these fluctuations, resulting in a more stable forecast.

Moving Average Forecasts with a Smaller Number of Observations Are