Weighted Moving Average

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Weighted Moving Average

An average in which some values count for more than others, and in which less recent values are dropped off the average. For example, if an index is weighted for prices over the previous 20 days, this means that the average price of the stocks will move more when the values with higher price move and values are removed from the average after 20 days have elapsed. This helps correct for both outdated information and the fact that averages tend to be affected by extreme values.
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The weighted moving average has poor forecast accuracy due to its reliance on simple weights rather than rigorous statistical models that capture trends, day of week and week of year patterns and correlation in the data accurately.
To illustrate the estimation results obtained from using the weighted moving averages and setting [alpha] according to the RMSPE criterion, in panels 1.
The estimates that used the weighted moving averages with [beta] = 0.
The significantly lower estimated loss ratios reflect the combined effects of estimating loss ratios using the weighted moving averages and the adjustments made for the catastrophic losses.
The IDW technique is the most common weighted moving average and is a first order interpolation method.
As with the equally weighted moving averages, the parameter u is assumed to equal zero.
This concept is illustrated in Chart 2, which plots time series of value-at-risk measures using exponentially weighted moving averages
We begin by explaining the three most common categories of value-at-risk models--equally weighted moving average approaches, exponentially weighted moving average approaches, and historical simulation approaches.
The exponentially weighted moving average, (EWMA), has found applications in a number of different areas.
Roberts[7] is often credited for first suggesting the use of an exponential weighted moving average, EWMA, as a statistic for a control chart (although he used the term geometric moving average).
Weighted moving averages is a patient-result-based system for process control of red-cell-related parameters.
Weighted moving averages anchors the validity of the indices by referencing one primary measurement, hemoglobin, to a defined calibration event.

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