You need to decide whether you should invest in a particular stock. You would like to invest if the price is likely to rise in the long run. You have data on the daily average price of this stock over the past 12 months. Your best action is to
A) compute moving averages.
B) perform exponential smoothing.
C) estimate a least square trend model.
D) compute the MAD statistic.

Question

Quizplus · Accepted Answer

Estimating a least square trend model will give a better indication of whether the stock is likely to rise in the long run as it will show the overall trend of the stock price over the past 12 months. Moving averages and exponential smoothing may not account for long-term trends and may only show short-term fluctuations. Computing the MAD statistic would only give a measure of the accuracy of the forecast, but not necessarily whether the stock price will rise in the long run.

You Need to Decide Whether You Should Invest in a Particular