Table 4 gives the actual change in the log of sales of Cisco Systems from 1Q 2001 to 4Q 2001, along with the forecasts from the regression model Icirc ln (Sales t) 0 0661 0 4698 Icirc ln (Sales t 1) estimated using data from 3Q 1991 to 4Q 2000 (Note that the observations after the fourth quarter of...

A The RMSE of the outofsample forecast errors is approximately 27 percent Outofsample error refers t ...

Table 4 gives the actual change in the log of sales of Cisco Systems from 1Q:2001 to

Question:

Table 4 gives the actual change in the log of sales of Cisco Systems from 1Q:2001 to 4Q:2001, along with the forecasts from the regression model Î”ln (Sales t) = 0.0661 + 0.4698Î”ln (Sales t ˆ’1) estimated using data from 3Q:1991 to 4Q:2000. (Note that the observations after the fourth quarter of 2000 are out of sample.)

TABLE 4 Actual Values of Changes in the Log of Sales Aln (Sales,) 0.1308 0.0345 -0.3557 Forecast Values of Changes in th

A. Calculate the RMSE for the out-of-sample forecast errors.
B. Compare the forecasting performance of the model given with that of another model having an out-of-sample RMSE of 20 percent.