Using the Best Buy revenue data:
a) Create a sales forecast for the period of July 2017 to April 2018 using the Forecast Sheet. Be sure to include the forecast statistics so that you can judge the quality of the model.
b) What are the optimal smoothing constants (?, ?, and ?) according to this model, and how do they compare to those for the Holt-Winters Multiplicative Seasonal model?
c) According to FactSet, analysts are forecasting the following revenues for the next year. How do your numbers compare?
d) Square the RMSE from the Forecast Sheet to make it more comparable to our MSE. How does this compare to the MSE of the Holt-Winters Multiplicative Seasonal model?
a) See the forecasts at left.
b) The optimal parameters are:
? = 0.5000, ? = 0.0010, ? = 0.0010
These are not terribly different from our multiplicative model. a is a bit higher, while b and g are quite a bit smaller.
c) Our model is forecasting lower sales in each quarter than analysts expectations.
e) The HWM model has a much higher MSE indicating that the Forecast.ETS model gives a better fit. However, as discussed in the text, we don't know exactly how Excel is calculating the RMSE, so it isn't completely clear that this model is better.
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