BUS Assignment 5

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University of Idaho *

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354

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Economics

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Apr 3, 2024

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Assignment 5 Lyla DuBois 1. Simple Forecasting Methods The results are relatively around the same price with a slight variance by a couple cents. The exponential smoothing (a=0.7) has the lowest MSE but gas prices tend to take a while to drop that much so I would assume that k=3 MSE is the most accurate prediction for gas prices next month. 2. Forecasting with a Linear Trend Specific Numeric Interpretation for the coefficient on the trend variable: Every month the gasoline price increases by approximately $0.02. This seems pretty accurate compared to question one. The trend model forecasts the price of gasoline in December 2023 will be $3.67.
3. Seasonality in Gasoline Prices In comparison to question two the coefficient is a lot higher, meaning that in the years 2022 and 2023 gas prices were much higher in comparison to earlier years. For quarter two gas prices go up approximately $0.50, in quarter three gas prices go up $0.38, and in quarter 4 gas prices go down $0.01 all in comparison to the intercept. This model forecasts the price of gasoline in December 2023 will be $3.54 which is lower than the results in question 2. 4. Wildcard - monthly dummy variables 5. Forecasting with additional variables The coefficient of the price of oil means that when the price of oil goes up the gas price will increase by .026…The forcasted price of oil using the entire data set is 87.21 and 74.94 when only using January 2022 forward. The forecast using the whole data makes more sense to me in my opinion. I think using a variable of refining costs as they vary could impact the price of oil, thus gas.
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