Simple Moving Average

How to estimate values

With simple moving averages, to determine the estimated value for a given period, you'll take the average of the X periods before it.

Scenario: Given the yearly Tinder statistics from Delta Apple Pi at Crammer Nation University, determine the estimated values using a 3-point moving average.

Year20192020202120222023
Tinder Matches12041329129714321406
Estimated (y-tilde)--?????????

y-tildet is the estimated value for a current period "t".
MA(L) is the Moving Average of the previous L periods.

Given L = 3...

Year20192020202120222023
Tinder Matches12041329129714321406
Estimated--?????????

t-tilde2021 = (1204 + 1329 + 1297) / 3
t-tilde2021 = (3830) / 3
t-tilde2021 = 1276.67

Year20192020202120222023
Tinder Matches12041329129714321406
Estimated--1276.67??????
Year20192020202120222023
Tinder Matches12041329129714321406
Estimated (y-hat)--1276.671352.671378.33

Impact of L

L determines how many previous periods we consider when estimating a period's value.

In the graph below...

  • L = 2 is more reactive to the current values
  • L = 6 is less reactive to the current values

The lower / higher L is, the more / less reactive the forecast is to the actual values!

This is because we're taking the average of more values, so an individual value is less impactful on the forecast!

Predicted values

With simple moving averages, to determine the predicted value for a given period, reference the estimated value from the previous period!

Scenario: Given the yearly Tinder statistics from Delta Apple Pi at Crammer Nation University, determine the predicted value for 2024.

Year20192020202120222023
Tinder Matches12041329129714321406
Estimated--1276.6671352.6671378.333

Answer: The predicted Tinder matches for 2024 are 1378.333.

Year201920202021202220232024
Tinder Matches12041329129714321406-
Estimated--1276.6671352.6671378.333-
Predicted (y-hat)---??????1378.333

You can only predict one period into the future!

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