Moving Average (MA)

Case

A financial manager need to know how profit margins (net profit after taxes divided by sales). He has done research for the past 20 quarters. The data follow.

1. Development of a line graph

2. Development of MA (3) and MA (7) and the graph

Moving Average (MA) is one of sets of control charts for variables data, which shows quantitative and continuous measurement. The MA3 monitors average value over past 3 periods (in this case, 3 quarters). The MA7 shows average value over past 7 periods (in this case, 7 quarters). It will be used for detecting some small shifts in the average process in 3 periods. It discloses processes of intrinsic cycles or long (or short time) trend by smoothing value fluctuation in raw or original data.

3. Development of a residual plot and the graph

This data analysis is finally as following.