Mutual funds. The money that is invested in mutual funds is often referred to as “Fund Flows.” The following time series plot shows the monthly Fund Flows ($M) from January 1990 to October 2002.

a) What time series components do you observe in this series?

b) Develop a 6-month and 12-month moving average model for this series.

c) Fit a single exponential smoothing model to the series.

d) Use these models to forecast the Fund Flows for October 2002.

e) Compute measures of forecast error (e.g., MAD and MAPE) and compare the accuracy of the forecasts for these two models.

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Fund Flows (US $M) 50,000+ 25,000+ 0- -25,000+ -50,000+ www Wh Month Jan Jan Jan Jan Jan Jan Jan Year 1990 1992 1994 1996 1998 2000 2002