The U.S. stock market experienced an economic recovery during 2011 and 2012 after a major recession. The data in the Excel file S&P 500.xlsx show the end-of-month values for the S&P 500 Index during these two years.

a. Construct a graph showing the S&P Index over time.

b. Forecast the S&P Index for the end of January 2013 using exponential smoothing with a = 0.2.

c. Calculate the MAD for the forecast in part b.

d. Forecast the S&P Index for the end of January 2013 using exponential smoothing with trend adjustment and setting a = 0.2 and b = 0.5.

e. Calculate the MAD for the forecast in part d.

f. In which forecast do you have the most confidence?

AppendixLO1