Business Forecasting: The Principles and Practice of Forecasting Business and Stock-Market Trends with Especial Reference to Business Cycles

By Lewis H. Haney | Go to book overview
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APPENDIX

I. Application of Statistical Methods

By FREDERICK C. REICH


COMPUTATION OF THE WEIGHTED MOVING AVERAGE

An illustration of a simple moving average appeared on page 33. In this case all items had equal weights. It is sometimes desirable, however, when statistical series are erratic, to weight some of the items more heavily than others. Experience alone will determine the weights to use.

A simple example of a three-month weighted moving average follows. In this example the first month is counted once 1), the second month twice 2), and the third month once 1). This weighted sum is divided by the sum of the "weights," 4, to obtain the "weighted average." The middle month thus has twice the weight of either of the others.


Value of Merchandise Imports into the United States (Adjusted for Seasonal Variation)
1929Adjusted Index
(Average 1921-
1928 = 100)
Three-Month
Moving Total
Three-Month
Moving Average
Middle month
weighted twice
Column 2 ÷ 4
January119.2----
February120.8468.5117.1
March107.7457.6114.4
April121.4474.3118.6
May123.8485.6121.4
June116.6477.2119.3
July120.2479.7119.9
August122.7485.2121.3
September119.6489.5122.4
October127.6485.0121.3
November110.2450.5112.6
December102.5----

-349-

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