Eco 309-Assignment 2- Solution-due by midnight on Sunday, Oct 22nd, 2023

Total points 125. Submit through D2L in Word/Excel format, single or multiple files. Must show
your work, answer all parts of the question, and write necessary explanations to earn full points.
You have to use Excel to solve this numerical problem (project).
The data below is for 24 periods of sales in $millions.
t Sales(Y)
1 32
2 34
3 40
4 41
5 36
6 42
7 48
8 44
9 45
10 46
11 44
12 52
13 60
14 56
15 52
16 60
17 65
18 68
19 69
20 62
21 67
22 70
23 74
24 77

1. Plot the time series data. Forecast for the 25th period using simple exponential smoothing with
alpha 0.3 and 0.6 and plot the actual 24 period values with forecasted values. Also calculate the
errors (as well as MPEs) and plot the errors for the two forecasts. Compare the two forecasts
using MSE and RMSE. Comment on the error plots (about stationarity). Do you see systematic
underestimation? How do you measure it and visualize it? 25 points

2. With the data above, perform the forecast using Holt’s two parameter model with alpha = 0.4
and beta = 0.5. Plot the Holt’s forecast with actual values. Also calculate the MSE for Holt’s
forecast. Is it better than the simple exponential smoothing forecasts? Comment on the

1
underestimation or overestimation using suitable measure. Plot the errors and MPE for Holt’s
model. Does it look nearly stationary. 35 points
3. For the data below (Production = Y in million tons) plot the data and comment whether you
see a seasonal pattern. Perform Holt-Winters’ seasonal forecast using alpha = 0.5, beta = 0.6 and
gamma = 0.7. Make forecasts for 2018-q1 and 2018-q2 using Holt-Winters’ model. Calculate
the errors and MSE and RMSE. Plot the errors and comment on the plot. 40 points

period=
Year-q t Y
2012-1 1 60
2012-2 2 75
2012-3 3 70
2012-4 4 68
2013-1 5 70
2013-2 6 93
2013-3 7 90
2013-4 8 80
2014-1 9 85
2014-2 10 100
2014-3 11 95
2014-4 12 90
2015-1 13 95
2015-2 14 125
2015-3 15 110
2015-4 16 108
2016-1 17 125
2016-2 18 145
2016-3 19 140
2016-4 20 135
2017-1 21 138
2017-2 22 165
2017-3 23 157
2017-4 24 155
2018-1
2018-2