QUESTION:

Why do I need Box-Jenkins? Can't I use exponential smoothing or a simple average of the past, like a 12

period moving average?

ANSWER:

All of the approaches that you mentioned are forms of Box-Jenkins. An ARIMA model, univariate Box-Jenkins, is simply the answer to a forecaster's dream;

•  How much of the series do I need to use

and

•  What weights should I use?

An exponential smoothing model assumes that all of the past is needed and that the weights can be

described by one curve or equation. This is not a very realistic assumption and each and every time series

may not be adequately described by these two assumptions. A simple 12 period average assumes that 12

previous values are needed and that these weights are equal to each other (.083). A possible scheme might

be 2/6, 1/6, 3/6 or whatever. There is no need to assume the optimal way to weight the past let analysis i.e.

Box-Jenkins do the work and use the best conditions.