F IL E The S&P 500 Index is a value-weighted index of prices of 500 large-cap common stocks actively traded in the United States. A research analyst at an investment firm is attem pting to forecast the daily stock price of Genzyme Corporation, one of the world's leading biotech companies, using both the S&P 500 Index as well as Genzyme's past stock prices. The following table shows a portion of the daily adjusted closing prices of Genzyme (y )

and the S&P 500 Index (x ) from December 1,2010, to December 22, 2010; the full data set is on the text website, labeled Genzyme.

Date y X

12/ 1/2010 71.14 1206.07 12/2/2010 70.97 1221.53

⋮ ⋮ ⋮

12/22/2010 71.52 1258.84 SOURCE: www.finance.yahoo.

Estimate three models:

(a) yt = β 0 + β1xt − 1 + єt,

(b) yt =

β0 + β1yt−1 + єt , and (c)yt = β0 + β1xt − 1 + β2yt − 1 +єt.

Use the most suitable model to forecast the Genzyme daily stock price for December 23,2010.