When the underlying mean of a time series is very stable and there are no trend, cyclical, or seasonal influences:
A) a simple moving-average forecast with n = 20 should outperform a simple moving-average forecast with n = 3.
B) a simple moving-average forecast with n = 3 should outperform a simple moving-average forecast with n = 15.
C) a simple moving-average forecast with n = 20 should perform about the same as a simple moving-average forecast with n = 3.
D) an exponential smoothing forecast with a = 0.30 should outperform a simple moving-average forecast with α = 0.01.

Question

Quizplus · Accepted Answer

When the underlying mean of a time series is very stable and there are no trend, cyclical, or seasonal influences, using a larger moving average window (n) will improve forecast performance as it will smooth out any random fluctuations that may be present in the data. Therefore, a simple moving-average forecast with n = 20 should outperform a simple moving-average forecast with n = 3. The other options are not necessarily true in this scenario.

When the Underlying Mean of a Time Series Is Very