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Can you please provide further clarification on moving averages? The period in which the average relates is not clear.
Thank you.
It depends on the question.
If you are given 3-month periods, then the moving average is the average for a 3-month period. If you are given 4-month periods, then the average is the average for a 4-month period, and so on.
The problem is this…..
If they are 4-month periods, then there are three of them in a year, and the average corresponds to the middle period of the three. We can compare the actual results for that period with the average.
If, however, they are 3-month periods, then there are four of them in a year, and the average corresponds to the the very middle 3 months of the year, which does not correspond to any of the four actual 3-month periods. That is why we then need to take a second average so that we have a figure to compare with the actual results for a particular 3-month period.
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