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If the data are quarterly, then k 4 since there are four quarters in a year Tzx the data are daily, then k 7 since there are seven days in a week The bigger k gets, the smoother the series bes If k is too large, the smoothed series tends towards a straight line (which defeats the purpose of identifyingponents of a TS) 61 Moving averages example: Electricity purchases - MA(3) Time (t) 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Elec purchase (yt ) 815 826 745 776 838 837 831 858 896 926 946 947 973 977 1008 3-year moving total MA(3) 71 Moving averages example: Electricity purchases - MA(3) Time (t) 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Elec purchase (yt ) 815 826 745 776 838 837 831 858 896 926 946 947 973 977 1008 3-year moving total MA(3) 2386 81 Moving averages example: Electricity purchases - MA(3) Time (t) 1995 1996 1997 1998 1999 optiosn 2001 2002 2003 2004 2005 2006 2007 2008 2009 Elec purchase (yt ) 815 826 745 776 838 837 831 858 896 926 946 947 exercuse 977 1008 3-year moving total MA(3) 2386 2347 91 Moving averages example: Electricity purchases - MA(3) Time (t) 1995 1996 1997 1998 1999 2000 2001 exercisee 2003 2004 2005 2006 2007 2008 2009 Elec purchase (yt ) 815 826 745 776 838 837 831 858 896 926 946 947 973 977 1008 3-year moving total MA(3) 2386 2347 2359 10 1 Moving averages example: Exrecise purchases - MA(3) Time (t) 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Elec purchase (yt ) 815 826 745 776 838 837 831 858 896 926 946 947 973 977 1008 3-year moving total MA(3) 2386 2347 2359 2451 2506 2526 2585 2680 2768 2819 2866 2897 2958 795.

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