A composite forecast formed from two unbiased forecasts is: y t+h,t c =y t+h,t a +(1)y t+h,t b

where is the weight of each forecast:

a). Derive the combined forecast errors. [5 Marks] b)

. Derive the variance of the combined forecast errors. [10 Marks]

c). Derive the optimal combining weight . [10 Marks ]