Based off the screenshot below, could someone please describe (in detail!) why t

Question

Based off the screenshot below, could someone please describe (in detail!) why the average of all the historical data method is a better method than the naive method? Thank you so much!

Problem 8-3 Consider the following time series data. Week 1 2 3 4 5 6 Value 18 13 16 11 17 14 The following are the results using 2 different methods as the forecast for the next week: Naïve method Average of all (most recent value) the historical data a. Mean absolute error b. Mean squared error c. Mean absolute percentage error Which method appears to provide the more accurate forecasts for the historical data? 4.40 20.80 31.88 2.73 10.86 21.17 Average of all the historical data Explain. The input in the box below will not be graded, but may be reviewed and considered by your instructor

Explanation / Answer

To compare forecasting methods, we always prefer the method over others which provides the lowest error. In the given table, All the errors for average method is less as compared to the errors of Naive method and hence, it appears that average method is providing better forecast.

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