Consider the following table, which shows a portion of the closing prices of the S&P 500 Index for 21 trading days in November 2010.

Date.................... S&P Price

1-Nov..................... 1184.38

2-Nov..................... 1193.57

⋮..................................⋮

30-Nov.................... 1180.55

a. Use a 3-period moving average to make a price forecast for December 1, 2010.

b. Use the exponential smoothing method to make a price forecast for December 1, 2010. Use α = 0.4.

c. Which of the above smoothing methods results in a lower MSE?

d. You find out that the actual S&P 500 closing price on December 1, 2010 was 1,206.07. Was the forecast performance of the two methods consistent with their in-sample performance in part c?