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BUS 5030 Module 6 - Problem Set Time Series Analysis Worksheet

This document provides instructions for a time series analysis problem set involving Microsoft stock price data over 36 months. Students are asked to: 1) Create a line graph of the stock prices 2) Determine whether to use single, double, or triple exponential smoothing based on the graph 3) Perform the chosen smoothing method using an online tool and provide the graph and 6-month forecast 4) Make a buy or sell recommendation for the stock based on the forecast The student chooses double exponential smoothing due to trends in the data, provides the smoothing graph and 6-month forecast, and recommends buying the stock due to the upward forecasted trend.

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20 views5 pages

BUS 5030 Module 6 - Problem Set Time Series Analysis Worksheet

This document provides instructions for a time series analysis problem set involving Microsoft stock price data over 36 months. Students are asked to: 1) Create a line graph of the stock prices 2) Determine whether to use single, double, or triple exponential smoothing based on the graph 3) Perform the chosen smoothing method using an online tool and provide the graph and 6-month forecast 4) Make a buy or sell recommendation for the stock based on the forecast The student chooses double exponential smoothing due to trends in the data, provides the smoothing graph and 6-month forecast, and recommends buying the stock due to the upward forecasted trend.

Uploaded by

DEE
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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BUS 5030: Applied Economics and Statistics

Module 6 - Problem Set: Time Series Analysis Worksheet

Complete this worksheet using the directions within to guide you. Submit your completed worksheet in
the “Assignment and Grades” tab in your course menu. When you have submitted this assignment for
grading, please return to Module 6 for a module wrap-up.

Problem Set: Time Series Analysis Worksheet


Directions: In this assignment, you will take stock data and perform a time series analysis on the data
to forecast price movements. The chart at the end of this worksheet provides actual end-of-the-month
prices, rounded to the nearest dollar, of Microsoft’s stock for 36 months. Use the chart to address the
steps 1-4.

Step 1: Create a line graph showing the stock price over the 36 months. (You can use this graph
maker.) Provide a screenshot of the graph you created.

Above is the screenshot of the line graph showing Microsoft’s price for the period of 36months.

Step 2: Based on what you see in the graph from Step 1, should you use single, double, or triple
exponential smoothing? Why?

Exponential smoothing is a time series forecasting method for univariate data. ... Forecasts
produced using exponential smoothing methods are weighted averages of past observations,
with the weights decaying exponentially as the observations get older
Simple (single) exponential smoothing uses a weighted moving average with exponentially
decreasing weights. Holt's trend-corrected double exponential smoothing is usually more
reliable for handling data that shows trends, compared to the single procedure. Triple exponential
smoothing is used to handle the time series data containing a seasonal component. This method is based on
three smoothing equations: stationary component, trend, and seasonal.
BUS 5030: Applied Economics and Statistics
Module 6 - Problem Set: Time Series Analysis Worksheet

Based on the graph above, a double exponential smoothing is to be used.


The Microsoft stock prices peaked at the 13th, 16th, 24th and 31st months and this is fairly typical of when
there is a high demand for the Microsoft stock. When there more people demand than sell stocks, the price
goes up and conversely when people sell a stock than buy it , the prices fall. This explains the slow rise in
price in the first 12months and the stock price peaks in the 13th month, 16th month, 24th month and 31st
month.
I created the same graph and drew a trend line to see if one exists as seen below.

MICROSOFT STOCK PRICE


160
140
120
CLOSING PRICE

100
80
60
40
20
0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35

MONTH

CLOSING PRICE TREND LINE

Step 3: Perform the smoothing you chose using this online tool and copy the graph and the forecasted
values for the next six months. Provide screenshots here.
BUS 5030: Applied Economics and Statistics
Module 6 - Problem Set: Time Series Analysis Worksheet

The black line is a representation of our given data, the red line is the double smoothing result, after the
dotted line is the forecast for future sales for the next six months. Expected future sales is represented
by the red line after the dotted line, however, statistically, sales can fall anywhere in between the two
blue lines after the dotted line

t Forecast
37 141.86742125941
38 144.401047887144
39 146.934674514879
40 149.468301142613
41 152.001927770347
42 154.535554398082

The table above shows the forecast values for the next six months.
BUS 5030: Applied Economics and Statistics
Module 6 - Problem Set: Time Series Analysis Worksheet

Step 4: Based on the forecast in Step 3, make a recommendation on whether an investor should buy or
sell Microsoft stock. Explain in detail.

t Forecast
37 141.86742125941
38 144.401047887144
39 146.934674514879
40 149.468301142613
41 152.001927770347
42 154.535554398082

Date Closing Price


1 60
2 60
3 62
4 65
5 64
6 66
7 68
8 70
9 69
10 73
11 75
12 74
13 83
14 84
15 86
16 95
17 94
18 91
19 94
20 99
21 99
22 106
23 112
BUS 5030: Applied Economics and Statistics
Module 6 - Problem Set: Time Series Analysis Worksheet

24 114
25 107
26 111
27 102
28 104
29 112
30 118
31 131
32 124
33 134
34 136
35 138
36 139
(Source: finance.yahoo.com)

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