Question 4: [15 marks] Here we investigate whether Holt-Winters smooth- 4/4 ing can improve our forecasts. Use a Holt-Winters smoothing method with seasonality, to produce 1-step ahead and 3-step ahead forecasts and com- pute the MSFE for these forecasts. You should use smoothing parame- ters a = B = 1 = 0.4 and start the out-of-sample forecasting exercise at To = 50. Plot these out-of-sample forecasts and comment on the results. Additionally, estimate the values for a, b, and y which minimise the MSFE. Find the MSFE for these parameter vales and compare it to the baseline a = B = y = 0.4. Question 4: [15 marks] Here we investigate whether Holt-Winters smooth- 4/4 ing can improve our forecasts. Use a Holt-Winters smoothing method with seasonality, to produce 1-step ahead and 3-step ahead forecasts and com- pute the MSFE for these forecasts. You should use smoothing parame- ters a = B = 1 = 0.4 and start the out-of-sample forecasting exercise at To = 50. Plot these out-of-sample forecasts and comment on the results. Additionally, estimate the values for a, b, and y which minimise the MSFE. Find the MSFE for these parameter vales and compare it to the baseline a = B = y = 0.4