商情預測期中考

(Ch1~Ch3) 4/24/2018

I. Multiple choice (5 points each)

1. RMSE applied to the analysis of model forecast errors, treats

A) levels of large and small forecast errors equally.
B) large and small forecast errors equally on the margin.
C) large and small forecast errors unequally on the margin.
D) every forecast error with the same penalty.

2. Because of different units of various data series, which accuracy statistic can be used across
different series?
A) MSE.
B) RMSE.
C) MAPE.
D) MAE

3. An unbiased model
A) is one that does not consistently over-estimate or under-estimate the true value of a
parameter.
B) is one that consistently produces estimates with the smallest RMSE.
C) is one, which contains no independent variable; it depends solely on time-series pattern
recognition.
D) is one made up by a team of forecasters.

4. Given demands, D1 = 20, D2 = 16, and D3 = 12, what is F5 using the naive forecasting method?
A) F5 = 8
B) F5 = 12
C) F5 = 16
D) Inconclusive from the given data

5. When using quarterly data to forecast domestic car sales, how can the simple naive forecasting
model be amended to model seasonal behavior of new car sales, i.e., patterns of sales that arise at
the same time every year?
A) Forecast next period's sales based on this period's sales.
B) Forecast next period's sales based on last period's sales.
C) Forecast next period’s sales based on the average sales over the current and last three
quarters.
D) Forecast next period's sales based on sales four quarters ago.

6. Quarterly time-series data with a trend can be applied to models that assume stationary data by
A) Averaging the data over time.
B) Taking the first difference of the original series.
C) Taking the fourth difference of the original series.
D) Using a moving average.
1
7. Moving-average smoothing may lead to misleading inference when applied to
A) stationary data.
B) forecasting trend reversal in the stock market.
C) small and limited data sets.
D) large and plentiful data sets.

8. Which of the following is a factor in the decision to use exponential smoothing rather than moving-
average smoothing to forecast a given time series?
A) Amount of data available.
B) Importance of recent past versus distant past.
C) Forecast horizon.
D) Expertise of the forecast manager.

9. Which of the following is not correct concerning choosing the appropriate size of the smoothing
constant (or alpha) in the simple exponential smoothing model?
A) Select values close to zero if the series has a great deal of random variation.
B) Select values close to one if you wish the forecast values to depend strongly on recent
changes in the actual values.
C) Select a value that minimizes RMSE.
D) Select a value that maximizes mean-squared error.

10. The simple exponential smoothing model can be expressed as

A) a simple average of past values of the data.
B) an expression combining the most recent forecast and actual data value.
C) a weighted average, where the weights sum to zero.
D) a weighted average, where the weights sum to the sample size.

11. If the smoothing constant were chosen to be unity, the exponential smoothing model would equal
A) moving average smoothing.
B) Holt's exponential smoothing.
C) the simple naive model.
D) Winter's exponential smoothing.

12. Holt's forecasted values

A) contain no estimate of trend in the underlying series.
B) are superior when the underlying data has pronounced seasonality.
C) for periods into the future lie along a straight line.
D) are simple centered moving averages.

13. How many parameters must the forecaster (or the software) set using Winter's exponential
smoothing?
A) 0.
B) 1.
C) 2.
D) 3.
2
14.

In the Winters model shown above index 1 refers to quarter 1 in the data.
A) Thus, quarter 3 is a below average quarter.
B) Thus, quarter 3 is an above average quarter.
C) Thus, quarter 3 is an average quarter.
D) Nothing can be deduced about quarter 3.

II. Short essay/problem questions (10 points each)

1. Comment on the following quote by a recent graduate from Quant-Tech: "Nobody in their right
mind uses subjective forecasting techniques today. They are always biased and contain somebody
else's opinion, which is certainty nothing that can be trusted."

2. Contrast and compare forecasting for a private for-profit firm and for a public not-for-profit firm. Are
the two necessarily different from the perspective of the forecaster?

3. You are the quality control manager in a plant that produces bunjee cords. Your responsibility is to
oversee the production of the synthetic material in the cord. Specifically, your responsibility is to
ensure that bunjee cords have the correct elastic qualities to avoid personal injury lawsuits.

Your efforts are compounded in that you use two procedures for testing bunjee cord elasticity,
procedure A and procedure B. Procedure A is generally subject to error, but few are very large. On the
other hand, procedure B is very accurate but subject to large one-time errors. Specifically, forecast
errors in evaluating the dynamic cord elasticity per pound of load are presented below for a random
sample of four cords.

Procedure A Forecast Errors Procedure B Forecast Errors

.01 .008
-.01 -.009
-.02 -.008
.02 .03

Using mean-absolute deviation (MAD) and mean-squared error (MSE), evaluate the relative accuracy
of each procedure. Which procedure will you use in quality control testing?