Brandy has just completed testing forecasting models for predicting the total co

Question

Brandy has just completed testing forecasting models for predicting the total cost for hops purchases in the coming year at Jupiter Planet Brewery if the firm chooses not to buy hops using a futures contract. All values are in $1000s. MAEs for each model are shown in the table below. Based on this analysis, which is the best model?

ES(.2)

ES(.5)

ES(.8)

MA(3)

MA(5)

Trend

Seasonality + Trend

Model MAE ES (.2) 80.48176 ES (.5) 24.0315 ES (.8) 50.43553 MA (3) 86.99112 MA (5) 34.9178 Trend 63.76203 Seasonality + Trend 29.76213

Explanation / Answer

Mean absolute error is a indicative of deviation of forecast from the actual. Greater the MAE more bad the forecast is.

The lowest MAE is corresponding to ES(.5), Hence, thebest forecast is ES(0.5) option-(B)

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