The following table includes the information about a monthly time series. When the exponential smoothing method with α = 0.5 is applied,what is the MSE?
A) 21.5
B) 25
C) 41
D) 13.67

Question

The following table includes the information about a monthly time series.  When the exponential smoothing method with α = 0.5 is applied,what is the MSE?
A) 21.5 
B) 25 
C) 41 
D) 13.67

Quizplus · Accepted Answer

The MSE can be calculated by applying the formula: MSE = 1/(n-1) * Σ (actual value - forecast value)^2. Using exponential smoothing with α = 0.5, the forecast for March is 37.5, and for April it is 40.25. The actual values for March and April are 45 and 31, respectively. Therefore, the MSE = 1/(4-1) * [(45-37.5)^2 + (31-40.25)^2 + (29-35.63)^2] = 13.67.

The Following Table Includes the Information About a Monthly Time