7.2

(a) Apply Holt's linear method to the paperback and hardback series and compute four-day forecasts in each case.

(b) Compare the SSE measures of Holt's method for the two series to those of simple exponential smoothing in the previous question. Discuss the merits of the two forecasting methods for these data sets.

(c) Compare the forecasts for the two series using both methods. Which do you think is best?

(d) Calculate a 95% prediction interval for the first forecast for each series using both methods, assuming normal errors. Compare your forecasts with those produced by R.