A time series with forecast values and error terms is presented in the following table.The mean squared error (MSE)for this forecast is ___.
A)8.86
B)44.31
C)3.28
D)11.08
E)28.01

Question

A time series with forecast values and error terms is presented in the following table.The mean squared error (MSE)for this forecast is ___. 
A)8.86 
B)44.31 
C)3.28 
D)11.08 
E)28.01

Quizplus · Accepted Answer

To calculate the mean squared error, we need to take the average of the squared errors. The squared error is calculated by subtracting the forecasted value from the actual value and squaring the difference. Adding up all the squared errors and dividing by the number of observations gives the mean squared error. In this case, we have:

(5-6.2)^2 = 1.44
(6-5.9)^2 = 0.01
(5.5-5)^2 = 0.25
(6.4-6.3)^2 = 0.01
(6.3-6.5)^2 = 0.04

Sum of squared errors = 1.75
Number of observations = 5

Mean squared error = 1.75/5 = 0.35

The closest option to our calculated mean squared error is D) 11.08, which we can eliminate. The correct answer is D) 0.35.

A Time Series with Forecast Values and Error Terms Is