Emily Andrews has invested in a science and technology mutual fund. Now she is considering liquidating and investing in another fund. She would like to forecast the price of the science and technology fund for the next month before making a decision. She has collected the following data on the average price of the fund during the past 20 months:
Month Fund Price
1 $63 1/4
2 60 1/8
3 61 3/4
4 64 1/4
5 59 3/8
6 57 7/8
7 62 1/4
8 65 1/8
9 68 1/4
10 65 1/2
11 68 1/8
12 63 1/4
13 64 3/8
14 68 5/8
15 70 1/8
16 72 3/4
17 74 1/8
18 71 3/4
19 75 1/2
20 76 3/4
a. Using a 3-month average, forecast the fund price for month 21.
b. Using a 3-month weighted average with the most recent month weighted 0.60, the next most recent month weighted 0.30, and the third month weighted 0.10, forecast the fund price for month 21.
c. Compute an exponentially smoothed forecast, using α=0 .40, and forecast the fund price for month 21.
d. Compare the forecasts in (a), (b), and (c), using MAD, and indicate the most accurate.