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The accompanying data set provides the closing prices for four stocks and the stock exchange over...

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Basic Math

The accompanying data set provides the closing prices for fourstocks and the stock exchange over 12 days:

DateABCDStock Exchange
9/3/10127.3718.3421.0315.5110432.45
9/7/10127.1518.1820.4415.5110334.67
9/8/10124.9217.8820.5715.8210468.41
9/9/10127.3517.9520.5216.0210498.61
9/10/10128.3717.8220.4215.9810563.84
9/13/10128.3618.6421.1616.2110616.07
9/14/10128.6118.8321.2916.2210565.83
9/15/10130.1718.7921.6916.2510627.97
9/16/10130.3419.1621.7616.3610595.39
9/17/10129.3718.8221.6916.2610517.99
9/20/10130.9719.1221.7516.4110661.11
9/21/10131.1619.0221.5516.5710687.95

With the help of the Excel Exponential Smoothing tool, I wasable to forecast each of the stock prices using simple exponentialsmoothing with a smoothing constant of 0.3 (ie, damping factor of0.7). I was also able to calculate the MAD of eachof the stocks:

MAD of Stock A = 1.32

MAD of Stock B = 0.37

MAD of Stock C = 0.41

MAD of Stock D = 0.26

MAD of Stock Exchange = 83.85

Help me to calculate the Mean Square Error (MSE) of thestocks.

Answer & Explanation Solved by verified expert
3.9 Ratings (457 Votes)

so=xo

Forcast (st)=0.3x+(1-0.3)st-1, t > 0

Square Error= (Actual value-forcast.)2

Date A B C D Stock Exchange Forecast Square Error
9/3/2010 127.37 18.34 21.03 15.51 10432.45 A B C D Stock Exchange A B C D Stock Exchange
9/7/2010 127.15 18.18 20.44 15.51 10334.67 127.3700 18.3400 21.0300 15.5100 10432.4500 0.0484 0.0256 0.3481 0.0000 9560.9284
9/8/2010 124.92 17.88 20.57 15.82 10468.41 127.3040 18.2920 20.8530 15.5100 10403.1160 5.6835 0.1697 0.0801 0.0961 4263.3064
9/9/2010 127.35 17.95 20.52 16.02 10498.61 126.5888 18.1684 20.7681 15.6030 10422.7042 0.5794 0.0477 0.0616 0.1739 5761.6905
9/10/2010 128.37 17.82 20.42 15.98 10563.84 126.8172 18.1029 20.6937 15.7281 10445.4759 2.4113 0.0800 0.0749 0.0635 14010.0507
9/13/2010 128.36 18.64 21.16 16.21 10616.07 127.2830 18.0180 20.6116 15.8037 10480.9852 1.1599 0.3869 0.3008 0.1651 18247.9145
9/14/2010 128.61 18.83 21.29 16.22 10565.83 127.6061 18.2046 20.7761 15.9256 10521.5106 1.0078 0.3911 0.2641 0.0867 1964.2083
9/15/2010 130.17 18.79 21.69 16.25 10627.97 127.9073 18.3922 20.9303 16.0139 10534.8064 5.1199 0.1582 0.5772 0.0557 8679.4513
9/16/2010 130.34 19.16 21.76 16.36 10595.39 128.5861 18.5116 21.1582 16.0847 10562.7555 3.0762 0.4205 0.3622 0.0758 1065.0106
9/17/2010 129.37 18.82 21.69 16.26 10517.99 129.1123 18.7061 21.3387 16.1673 10572.5458 0.0664 0.0130 0.1234 0.0086 2976.3407
9/20/2010 130.97 19.12 21.75 16.41 10661.11 129.1896 18.7403 21.4441 16.1951 10556.1791 3.1699 0.1442 0.0936 0.0462 11010.4949
9/21/2010 131.16 19.02 21.55 16.57 10687.95 129.7237 18.8542 21.5359 16.2596 10587.6584 2.0629 0.0275 0.0002 0.0964 10058.4118
Sum of square error 24.3856 1.8644 2.2860 0.8679 87597.8081
MSE 2.2169 0.1695 0.2078 0.0789 7963.4371

MAD of Stock A = 2.2169

MAD of Stock B = 0.1695

MAD of Stock C =0.2078

MAD of Stock D = 0.0789

MAD of Stock Exchange = 7963.4371
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