Centred Moving Average(Using Excel)

Centred Moving average technique is one of the most commonly used techniques for prediction.

Its Logic lies in removing the seasonality of data and generating a smooth trend line.

No that doesn’t mean mean it removes seasonality, what we need to understand is that data=true signal +noise

This noise is nothing the seasonality, cyclical components that we see often in our graph.

Centred moving average technique classifies these two components to make a further accurate forecast.

So lets see, if this was our data

Year Quarter Sales
2009 1 4800
2009 2 4100
2009 3 6000
2009 4 6500
2010 1 5800
2010 2 5200
2010 3 6800
2010 4 7400
2011 1 6000
2011 2 5600
2011 3 7500
2011 4 7800
2012 1 6300
2012 2 5900
2012 3 8000
2012 4 8400

How would we forecast the sales for 2013 quarter 1-4.

As always the next step is visualisation.

Please refer to the link to the excel file below for detailed steps on how i solved it.

solution_cma

 

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