Moving Average

Moving Average Forecasts are the arithmetic means of the time series over a specific number of preceding periods. When a new value is added, the last is dropped from the calculation, so the specific number of preceding periods remains constant. Thus, the name “moving” average. Moving Average Forecasts tend to reduce the amount of variation over the present in a set of data. In the case of time series data, Moving Average Forecasts are often used to eliminate unwanted fluctuations, thereby smoothing the time series. The appropriate number of preceding periods should be chosen by selecting the amount of periods which yield the least error.