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Explain the meaning of moving average. |
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Answer» The short term variations are usually regular and have repetitions. The period of repetition of these variations are fond and their average is found for the given time series. This average of repetitions is known as the period of moving average. We find moving total of the variables of the given time series corresponding to the period of moving average. Keeping the average value in the centre the average obtained by dividing moving total by the period of moving average is called moving average. Suppose, the period of moving average is 3 years, then ‘3’ yearly moving average \(= \frac{3 ‘ yearly\, moving \,total}{ 3}\) Since the average value lies in the centre, we get the trend values that are free from short term variation. If the period of moving average is odd number say 3. 5, 7, …, moving average can be calculated easily. If it is even number its calculation becomes some what difficult. |
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