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Simple Moving Average

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In statistics, a moving average (rolling average or running average) is a calculation to analyse data points by creating series of averages of different subsets of the full data set. It is also called a moving mean or rolling mean and is a type of finite impulse response filter. (Source: Wikipedia)

For Example:

In our last example of moving average where manager of multinational company has recorded the demand of 12 months of products. Now let us calculate the average of the first three numbers (23+22+25)/3 = 23.33 in Cell C4. Now drag the formula using fill handle till cell C13.

Formula returns the Moving Average after month 3 till 12th.

Now let’s calculate how much good is this estimate, to check we need to calculate MSE (Mean Square Error).

To Calculate the Mean Square Error on this data set, perform all the steps which we have performed in the previous example of Moving Average.

Using this method MSE is 22.88 which is less than 25.3(Previous method value.)

Again, as per statistics estimates with small error is good. So here this method SMA is good compare to MA technique.

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