F I L E Consider the following table, which shows a portion of the closing prices of the S&P 500 Index for 21 trading days in November 2010. The complete data set can be found on the text website, labeled S&P Price.

Date S&P Price 1-Nov 1184.38 2-Nov 1193.57

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30-Nov 1180.55 Source: finance.yahoo.com .

a. Use a 3-period moving average to make a price forecast for December 1,2010.

b. Use the exponential smoothing method to make a price forecast for December 1,2010. Use α = 0.4.

c. Which of the above smoothing methods results in a lower MSE?

d. You find out that the actual S&P 500 closing price on December 1,2010 was 1,206.07. Was the forecast performance of the two methods consistent with their in-sample performance in part c?