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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Forecasting: Moving averages
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.