The file S12_75.xlsx contains five years of monthly data for a particular company. The first variable is Time (1 to 60). The second variable, Sales1, contains data on sales of a product. Note that Sales1 increases linearly throughout the period, with only a minor amount of noise. (The third variable, Sales2, is discussed and used in the next problem.) For this problem use the Sales1 variable to see how the following forecasting methods are able to track a linear trend.
a. Forecast this series with the moving average method with various spans such as 3, 6, and 12. What can you conclude?
b. Forecast this series with simple exponential smoothing with various smoothing constants such as 0.1, 0.3, 0.5, and 0.7. What can you conclude?
c. Now repeat part b with Holt’s exponential smoothing method, again for various smoothing constants. Can you do significantly better than in parts a and b?
d. What can you conclude from your findings in parts a, b, and c about forecasting this type of series?