FILE A research analyst at an investment firm is attempting to forecast the daily stock price of Home Depot, using causal models. The following table shows a portion of the daily adjusted closing prices of Home Depot y and the Dow Jones Industrial Average x from August 14, 2009, to August 31, 2009. The full data set is on the text website, labeled HD a n d DOW.

t y x August 14 26.92 9,321.40 August 17 25.89 9,135.34

⋮ ⋮ ⋮

August 31 27.07 9,496.28 SOURCE: w w w .fin a n c e .y a h o o .

Estimate three models:

(a) y1 = ß 0 + ß1Xt_1 + єt

(b) yt = ß0 +

ß1yt-1 + єt and

(c) yt = ß 0 + ß1xt-1 + ß2yt-1 + єt Use the most suitable model to forecast Home Depot's daily stock price for September 1,2009.