For series with negligible growth and seasonality, simple moving averages are frequently used to estimate the current level of a process, and the resultant value projected as a forecast for future observations. This paper shows that a linear combination of two simple moving averages (SMA) can provide an improved estimate of the underlying level of the process. The proposition is demonstrated by simulation, and good combinations are listed. The theory underlying the improvement is developed. The general rules are then illustrated through an application in an inventory situation.
- Combinations of forecasts
- Moving averages
- Time series
ASJC Scopus subject areas
- Management Information Systems
- Strategy and Management
- Management Science and Operations Research