5. Using the daily closing prices of American Express stock for a one year perio

Question

5. Using the daily closing prices of American Express stock for a one year period, answer the following:

a. Using moving average method with span of 3, forecast the price of stock for the next trading day.

b. Repeat part a with a span of 10.

c. Which of the above two models do you recommend? Justify your answer.

Date Open High Low Close 15-Oct-03 49.01 49.11 47.76 48.30 16-Oct-03 48.30 48.81 48.04 48.38 17-Oct-03 48.38 48.49 47.59 47.84 20-Oct-03 47.95 48.09 47.69 47.92 21-Oct-03 48.28 48.73 48.21 48.40 22-Oct-03 48.40 48.40 46.97 47.04 23-Oct-03 47.68 47.89 46.70 47.63 24-Oct-03 47.40 47.78 47.07 47.62 27-Oct-03 48.01 48.25 46.60 46.75 28-Oct-03 46.60 47.54 46.46 47.54 29-Oct-03 47.54 47.71 47.05 47.35 30-Oct-03 47.56 47.58 46.45 46.52 31-Oct-03 46.90 47.20 46.64 46.93 3-Nov-03 47.37 47.40 46.79 47.23 4-Nov-03 47.18 47.20 46.75 47.12 5-Nov-03 46.82 47.36 46.82 47.31 6-Nov-03 47.10 47.82 46.86 47.37 7-Nov-03 47.75 47.75 46.43 46.50 10-Nov-03 46.40 46.45 45.84 46.08 11-Nov-03 46.10 46.10 45.13 45.48 12-Nov-03 45.44 46.18 45.27 46.02 13-Nov-03 46.03 46.03 45.60 45.80 14-Nov-03 45.51 45.78 45.08 45.33 17-Nov-03 44.40 44.51 43.53 43.93 18-Nov-03 43.95 44.70 43.85 44.48 19-Nov-03 44.45 44.97 44.27 44.88 20-Nov-03 44.25 45.15 44.25 44.40 21-Nov-03 44.41 45.04 44.35 44.90 24-Nov-03 45.10 45.30 44.74 45.15 25-Nov-03 45.38 45.49 45.27 45.35 26-Nov-03 45.36 45.89 45.36 45.73 28-Nov-03 45.76 45.95 45.59 45.71 1-Dec-03 45.99 46.34 45.82 46.05 2-Dec-03 45.80 46.04 45.63 45.80 3-Dec-03 45.94 46.21 45.83 45.99 4-Dec-03 45.72 46.24 45.68 46.07 5-Dec-03 45.90 45.95 45.45 45.50 8-Dec-03 45.56 46.15 45.56 46.15 9-Dec-03 46.23 46.24 45.58 45.70 10-Dec-03 45.74 45.79 44.98 45.19 11-Dec-03 45.08 45.43 45.05 45.25 12-Dec-03 45.40 45.55 44.95 45.20 15-Dec-03 46.15 46.15 45.29 45.31 16-Dec-03 45.48 45.84 45.22 45.27 17-Dec-03 45.30 45.38 44.80 45.00 18-Dec-03 45.60 46.86 45.40 46.77 19-Dec-03 47.12 47.43 46.88 47.21 22-Dec-03 47.21 47.46 47.15 47.44 23-Dec-03 47.48 47.70 47.30 47.68 24-Dec-03 47.68 47.93 47.62 47.88 26-Dec-03 47.88 47.89 47.77 47.83 29-Dec-03 47.92 48.50 47.85 48.50 30-Dec-03 48.33 48.39 48.12 48.29 31-Dec-03 48.31 48.39 47.89 48.23 2-Jan-04 48.43 48.55 47.73 47.75 5-Jan-04 48.08 48.33 47.82 48.17 6-Jan-04 47.95 48.33 47.93 48.25 7-Jan-04 48.44 48.44 48.08 48.39 8-Jan-04 48.48 48.73 47.80 48.25 9-Jan-04 47.85 48.30 47.80 47.89 12-Jan-04 47.89 48.30 47.59 47.70 13-Jan-04 47.80 48.00 47.43 47.87 14-Jan-04 47.95 48.90 47.95 48.75 15-Jan-04 48.90 49.75 48.65 49.68 16-Jan-04 49.68 50.03 49.60 49.91 20-Jan-04 49.85 50.29 49.75 50.24 21-Jan-04 50.02 50.49 49.75 50.40 22-Jan-04 50.25 50.50 49.97 50.00 23-Jan-04 50.15 50.64 49.54 49.96 26-Jan-04 49.96 50.95 49.53 50.95 27-Jan-04 50.95 50.95 50.43 50.48 28-Jan-04 50.88 51.40 49.57 49.75 29-Jan-04 50.24 51.30 50.17 50.95 30-Jan-04 50.95 51.97 50.74 51.84 2-Feb-04 51.89 52.99 51.88 52.54 3-Feb-04 52.50 52.94 52.10 52.51 4-Feb-04 52.26 52.60 52.00 52.26 5-Feb-04 52.06 52.36 51.89 52.08 6-Feb-04 52.35 53.14 52.02 53.06 9-Feb-04 52.85 53.63 52.85 53.11 10-Feb-04 53.00 53.45 52.54 52.85 11-Feb-04 52.65 53.98 52.49 53.71 12-Feb-04 53.62 53.65 53.01 53.35 13-Feb-04 53.40 53.65 53.01 53.65 17-Feb-04 53.52 53.87 53.37 53.68 18-Feb-04 53.69 53.88 53.31 53.40 19-Feb-04 53.65 53.84 53.29 53.40 20-Feb-04 53.43 53.50 53.02 53.16 23-Feb-04 53.10 53.28 52.70 53.06 24-Feb-04 53.06 53.22 52.71 53.18 25-Feb-04 53.05 54.50 53.05 53.58 26-Feb-04 53.35 53.64 53.21 53.39 27-Feb-04 53.30 53.86 53.22 53.42 1-Mar-04 53.42 53.91 53.35 53.65 2-Mar-04 53.35 53.90 53.35 53.41 3-Mar-04 53.35 53.63 53.18 53.49 4-Mar-04 53.40 53.61 53.29 53.36 5-Mar-04 53.10 53.62 52.77 52.77 8-Mar-04 52.87 53.39 52.78 53.14 9-Mar-04 53.05 53.30 53.05 53.18 10-Mar-04 53.15 53.25 52.17 52.19 11-Mar-04 51.65 52.64 51.52 51.53 12-Mar-04 51.65 52.38 51.39 52.12 15-Mar-04 51.87 51.88 50.90 50.95 16-Mar-04 51.28 51.43 50.12 50.65 17-Mar-04 51.10 51.26 50.80 51.00 18-Mar-04 50.90 51.90 50.85 51.56 19-Mar-04 51.56 51.71 51.06 51.08 22-Mar-04 51.00 51.00 50.07 50.21 23-Mar-04 50.45 50.66 50.15 50.21 24-Mar-04 50.38 50.49 49.66 50.03 25-Mar-04 50.24 50.36 49.64 49.95 26-Mar-04 49.95 50.40 49.81 50.03 29-Mar-04 50.33 51.06 50.23 50.86 30-Mar-04 51.15 52.02 51.10 51.91 31-Mar-04 51.76 51.91 51.54 51.85 1-Apr-04 51.85 52.42 51.68 52.20 2-Apr-04 52.75 52.75 52.20 52.43 5-Apr-04 52.33 52.60 52.23 52.59 6-Apr-04 52.35 52.45 52.26 52.40 7-Apr-04 52.45 52.64 52.25 52.38 8-Apr-04 52.58 52.82 51.90 52.14 12-Apr-04 52.06 52.64 52.00 52.26 13-Apr-04 52.40 52.45 51.32 51.40 14-Apr-04 51.00 51.23 49.45 49.80 15-Apr-04 49.80 50.26 48.90 49.75 16-Apr-04 49.95 50.71 49.53 50.58 19-Apr-04 50.42 50.60 50.01 50.21 20-Apr-04 50.17 50.27 49.50 49.51 21-Apr-04 49.10 49.88 49.01 49.88 22-Apr-04 49.58 50.91 49.53 50.78 23-Apr-04 50.58 50.64 50.20 50.27 26-Apr-04 50.28 50.31 49.89 50.28 27-Apr-04 50.35 50.78 50.11 50.15 28-Apr-04 49.92 49.98 49.04 49.04 29-Apr-04 49.05 49.50 48.73 49.04 30-Apr-04 49.10 49.35 48.81 48.95 3-May-04 48.99 49.46 48.98 49.39 4-May-04 49.35 49.91 49.20 49.31 5-May-04 49.20 49.75 49.20 49.52 6-May-04 49.27 49.47 48.68 49.18 7-May-04 48.70 49.27 48.41 48.49 10-May-04 48.30 48.64 47.50 48.25 11-May-04 48.11 48.60 47.95 48.14 12-May-04 48.00 48.38 47.32 48.21 13-May-04 47.90 48.70 47.89 48.47 14-May-04 48.47 49.03 48.42 48.86 17-May-04 48.50 49.30 48.20 48.77 18-May-04 48.78 49.05 48.72 48.99 19-May-04 49.09 49.66 48.71 48.84 20-May-04 48.85 49.44 48.85 49.33 21-May-04 49.34 49.97 49.33 49.63 24-May-04 49.82 50.00 49.66 49.93 25-May-04 49.80 50.50 49.51 50.46 26-May-04 50.15 50.58 49.90 50.25 27-May-04 50.60 51.18 50.49 51.02 28-May-04 50.92 50.95 50.47 50.70 1-Jun-04 50.65 50.72 50.25 50.60 2-Jun-04 50.85 51.08 50.51 50.92 3-Jun-04 50.76 51.01 50.56 50.75 4-Jun-04 51.00 51.25 50.90 50.98 7-Jun-04 51.15 51.50 51.10 51.45 8-Jun-04 51.23 51.68 51.15 51.67 9-Jun-04 51.45 51.61 51.11 51.23 10-Jun-04 51.38 51.40 51.17 51.20 14-Jun-04 50.80 51.19 50.80 51.05 15-Jun-04 51.47 51.49 51.01 51.22 16-Jun-04 51.19 51.60 51.16 51.51 17-Jun-04 51.40 51.60 51.20 51.46 18-Jun-04 51.47 51.97 51.45 51.96 21-Jun-04 51.81 52.18 51.45 51.50 22-Jun-04 51.28 51.65 51.14 51.50 23-Jun-04 51.36 51.45 50.95 51.39 24-Jun-04 51.20 51.32 50.75 50.96 25-Jun-04 51.00 51.35 50.90 51.35 28-Jun-04 51.44 51.50 50.92 50.94 29-Jun-04 50.94 51.42 50.90 51.27 30-Jun-04 51.12 51.60 50.80 51.38 1-Jul-04 51.37 51.77 50.98 51.33 2-Jul-04 51.33 51.48 51.08 51.24 6-Jul-04 51.00 51.19 50.76 50.83 7-Jul-04 50.85 51.65 50.85 51.01 8-Jul-04 50.95 50.95 50.20 50.27 9-Jul-04 50.52 50.57 49.80 50.01 12-Jul-04 49.85 50.05 49.42 49.71 13-Jul-04 49.58 49.66 49.22 49.49 14-Jul-04 49.30 49.72 48.87 49.25 15-Jul-04 49.40 49.44 48.76 48.90 16-Jul-04 49.20 49.20 48.63 48.73 19-Jul-04 48.95 49.00 48.30 48.45 20-Jul-04 48.35 49.12 48.22 49.12 21-Jul-04 49.35 49.65 48.34 48.35 22-Jul-04 48.00 48.47 47.70 48.33 23-Jul-04 48.00 48.30 47.91 48.11 26-Jul-04 48.11 49.00 47.95 48.90 27-Jul-04 49.10 49.50 49.10 49.44 28-Jul-04 49.45 49.94 49.24 49.89 29-Jul-04 49.93 50.20 49.85 49.96 30-Jul-04 50.03 50.25 49.92 50.25 2-Aug-04 49.80 50.40 49.62 50.28 3-Aug-04 50.28 50.28 49.76 49.91 4-Aug-04 49.65 50.50 49.59 50.21 5-Aug-04 50.17 50.21 49.50 49.55 6-Aug-04 49.55 49.80 49.27 49.34 9-Aug-04 49.34 49.57 49.30 49.30 10-Aug-04 49.45 50.17 49.45 50.09 11-Aug-04 50.09 50.23 49.85 50.13 12-Aug-04 49.95 50.17 49.45 49.47 13-Aug-04 49.50 49.60 49.29 49.35 16-Aug-04 49.35 49.64 49.30 49.42 17-Aug-04 49.75 49.91 49.52 49.73 18-Aug-04 49.65 50.03 49.61 50.03 19-Aug-04 49.90 50.04 49.56 49.83 20-Aug-04 49.66 50.01 49.63 50.00 23-Aug-04 49.83 50.04 49.69 49.70 24-Aug-04 49.90 49.95 49.56 49.75 25-Aug-04 49.80 49.99 49.56 49.95 26-Aug-04 49.97 50.21 49.90 50.12 27-Aug-04 50.12 50.18 49.97 50.00 30-Aug-04 49.80 49.96 49.63 49.63 31-Aug-04 49.80 50.02 49.55 50.02 1-Sep-04 50.00 50.24 49.85 50.11 2-Sep-04 50.05 50.50 49.99 50.47 3-Sep-04 50.42 50.64 50.26 50.26 7-Sep-04 50.50 51.10 50.49 50.99 8-Sep-04 51.05 51.13 50.80 50.94 9-Sep-04 50.94 51.01 50.70 50.90 10-Sep-04 50.90 51.37 50.80 51.33 13-Sep-04 51.30 51.74 51.27 51.49 14-Sep-04 51.26 51.38 51.02 51.33 15-Sep-04 51.33 51.33 50.86 50.90 16-Sep-04 50.92 51.13 50.76 50.90 17-Sep-04 51.19 51.49 51.09 51.40 20-Sep-04 51.20 51.35 51.03 51.16 21-Sep-04 51.25 51.56 51.22 51.48 22-Sep-04 51.08 51.25 50.77 50.87 23-Sep-04 50.95 51.10 50.82 50.87 24-Sep-04 50.82 51.45 50.81 51.21 27-Sep-04 51.05 51.17 50.58 50.65 28-Sep-04 50.81 51.00 50.71 50.83 29-Sep-04 50.83 51.38 50.75 51.38 30-Sep-04 51.28 51.57 51.28 51.46 1-Oct-04 51.47 51.96 51.32 51.65 4-Oct-04 52.60 52.71 51.85 52.63 5-Oct-04 52.88 52.94 52.50 52.76 6-Oct-04 52.75 53.27 52.74 53.27 7-Oct-04 53.27 53.44 53.02 53.07 8-Oct-04 52.78 52.98 52.09 52.25 11-Oct-04 52.27 52.70 52.27 52.53 12-Oct-04 52.22 52.77 52.12 52.71 13-Oct-04 52.71 52.85 52.01 52.15 14-Oct-04 52.15 52.34 51.55 51.71 15-Oct-04 51.93 53.20 51.89 52.50

Explanation / Answer

MINITAB used for calculation.

5. Using the daily closing prices of American Express stock for a one year period, answer the following:

a. Using moving average method with span of 3, forecast the price of stock for the next trading day.

Moving Average for Close

Moving Average for Close

Data      Close

Length    253

NMissing 0

Moving Average

Length 3

Accuracy Measures

MAPE 0.880860

MAD   0.437347

MSD   0.327638

Forecasts

Period Forecast    Lower    Upper

254        52.12 50.9981 53.2419

b. Repeat part a with a span of 10.

  

Moving Average for Close

Data      Close

Length    253

NMissing 0

Moving Average

Length 10

Accuracy Measures

MAPE 1.50244

MAD   0.74707

MSD   0.88183

Forecasts

Period Forecast    Lower    Upper

254       52.558 50.7175 54.3985

c. Which of the above two models do you recommend? Justify your answer.

We recommend the moving average method with span of 3 because it has small MAPE, MAD and MSD values than span of 10.

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