Compute the mean absolute deviation for each forecast


Problem: To determine how well the spans (3 days or 10 days) each forecast the known observations, compute the MAD (mean absolute deviation) for each forecast; see the website referenced above for the MAD formula.

The file contains the daily closing prices of American Express stock for a 1-year period.

a) Using a span of 3 days, forecast the price of this stock for the next trading day with the moving average method. How well does this method with span 3 forecast the known observations in this data set?

b) Repeat part a with a span of 10.

c) Which of these two spans appears to be more appropriate? Explain your choice.

See attached data file.

Reference Website:

Mathworld. https://mathworld.wolfram.com/MeanAbsoluteDeviation.html

Attachment:- Closing prices of American Express stock.rar

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Finance Basics: Compute the mean absolute deviation for each forecast
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