Question: Moving averages often are used to identify movements in stock prices. Daily closing prices (in dollars per share) for SanDisk for August 16, 2002, through September 3, 2002, follow

DAY PRICE($)

8/16 14.45
8/19 15.75
8/20 16.45
8/21 17.40
8/22 17.32
8/23 15.96
8/26 16.45
8/27 15.60
8/28 15.09
8/29 16.42
8/30 16.21
9/3 15.22

a. Use a five-day moving average to smooth the time series. Forecast the closing price for 9/4/2002.

b. Use a four-day weighed moving average to smooth the time series. Use a weight of 0.4 for the most recent period, 0.3 for the next period back, 0.2 for the third period back. and 0.1 for the fourth period back. Forecast the closing price for 9/4/2002.

c.. Use exponential smoothing with a smoothing constant of a = 0.7 to smooth the time series. Forecast the closing price for 9/4/2002.

d. Which of the three methods do you prefer?