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 mean 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

To determine if the stock is likely to rise in the long run, we need to estimate a trend in the daily mean price over the past 12 months. The most appropriate method for this is to estimate a least squares trend model, which can show us if the stock has been consistently increasing or decreasing over time. Moving averages and exponential smoothing are both methods for smoothing out short-term fluctuations in a time series, but they do not provide information about long-term trends. MAD (mean absolute deviation) statistic is a measure of forecast accuracy and is not relevant for this decision.

You Need to Decide Whether You Should Invest in a Particular