Moving Average Forecasting

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The response addresses the queries posted in 1353 words with references.

//In the following response, the main focus will be to explain the Moving Average Forecasting method. The response will explain in detail the working of this method and its greatest pitfalls. Also, the response will help in determining the consequence that is to be faced when using an inaccurate method. Further, the answer will explain reasons behind the selection of different forecast types for mitigation of forecast error. The following section will explain Moving Average Forecasting in detail.//

There are various methods for the purpose of forecasting and predicting the future, on the basis of information and data that are currently in hand. It is extremely crucial; as if the right forecasting is done it will help in making the right decision in the present scenario. The forecasting method is helpful in wide scenarios like forecasting for products and services, human resources requirements and also predicting requirements of inventory and materials needed in the business (Yaffee & McGee, 2000). A forecast is useful if it is done timely, accurately, generates reliable results, and the methods used should be easy to understand and use.

Moving average method is a commonly used method for the purpose of forecasting. The method makes use of calculation of basic averages of the last m observations. This method proves to be extremely useful in the case of time series involving slowly changing means. The initial step when undertaking moving average computations is to decide the time lap, which is to be taken for this calculation, example- 3 year, 4-year, 5-year, 7-year. The time lap which is to be chosen depends upon the periodicity of data, and there is no rule that is to be followed for the purpose of selecting the time lap. The determination about the period is done with the help of plotting the data on the graph and analyzing the average time intervals of peak and troughs. The main element under focus at the time of selecting the time lap is to understand that after how many years' fluctuations are occurring in data (Yaffee & McGee, 2000). The study of ...