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Assignment 3 2011 - University of Massachusetts Department...

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University of Massachusetts Department of Resource Economics RESEC 797A Fall 2011 Assignment 3: Due September 26, 2011 SIMPLE MOVING AVERAGES AND SEASONALITY 1. For V ariable 2 (which is nonseasonal), compute three-period moving averages for the within-sample period. Next, make a series of one-step-ahead ex post forecasts for Variable 2 using the procedure outlined on page 22 of the BM notes. Do you need to calculate seasonal indices? Why or why not? Compute the RMSE for the post-sample period only. 2. Provide a comparison of the post-sample forecast accuracy when using your simple moving average approach to provide predictions (from Part 1, above) relative to the naive no-change method. Use Theil's U statistic. If your U statistic is greater than 1, explain what happened in Part 1 to make things go wrong. That is, why did the procedure fail? Provide a suitable graph as part of your answer. 3. Switch your attention to Variable 1 . Provide a deseasonalized transformation of V ariable 1 .
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