Question

An analyst must decide between two different forecasting techniques for weekly sales of roller blades: a linear trend equation and the naive approach. The linear trend equation is F_t = 123 + 1.9t, and it was developed using data from periods 1 through 10. Based on data for periods 11 through 20 as shown in the table, which of these two methods has the greater accuracy if MAD and MSE are used? (Round your intermediate calculations and final answers to 2 decimal places.)

t	Units Sold
11	143
12	148
13	150
14	145
15	155
16	149
17	156
18	159
19	158
20	163

MAD (Naive)
MAD (Linear)
MSE (Naive)
MSE (Linear)

(Click to select)  Linear trend  Naive method  provides forecasts with less average error and less average squared error.

Please help Confused on the review test and need explanation and answers for these

Answer 1

Calculations:

Note: For MAD, the denominator in the no. of samples (n) but for MSE, it is (n - 1).

The value of 'n' itself is different for the two methods. For the Linear trend, we have the forecast for the entire 10 periods, so, n = 10. For the naive method, we can start forecasting from period-12 onward only, so, n = 9

Answer:

MAD (Naive)	4.89
MAD (Linear)	2.35
MSE (Naïve)	34.25
MSE (Linear)	8.07

So,

The Linear trend provides forecasts with less average error and less average squared error.