14. Consider the following stock price sequence: Day Price 1 25 2 27 3 26 28...

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14. Consider the following stock price sequence: Day Price 1 25 2 27 3 26 28 5 24 29 7 30 (12 marks) a) Based on the table above, compute the five-day moving averages for days 5, 6 and 7. If you assume that the five-day moving average price represents the true value of the stock, should you buy or sell shares on days 5, 6 and 7? (4 marks) b) Using a dataset comprising the entire history of closing prices for this stock, your analysis reveals the stock realised 198 runs in each series of 900 closing prices. You find the magnitude of the decline is similar to the previous day's increase, and vice versa. You believe the result of the runs test is statistically significant and that this relationship between closing prices and prior day closing prices will prevail in the future. Assume that trade for short term profits if you are able to forecast one-day returns, explain what you should do at the open on days 6 and 7? (4 marks) you will c) If you are a trend follower, what is your view of market efficiency? Discuss how you could prove that the market is inefficient or efficient in this form. (4 marks) 14. Consider the following stock price sequence: Day Price 1 25 2 27 3 26 28 5 24 29 7 30 (12 marks) a) Based on the table above, compute the five-day moving averages for days 5, 6 and 7. If you assume that the five-day moving average price represents the true value of the stock, should you buy or sell shares on days 5, 6 and 7? (4 marks) b) Using a dataset comprising the entire history of closing prices for this stock, your analysis reveals the stock realised 198 runs in each series of 900 closing prices. You find the magnitude of the decline is similar to the previous day's increase, and vice versa. You believe the result of the runs test is statistically significant and that this relationship between closing prices and prior day closing prices will prevail in the future. Assume that trade for short term profits if you are able to forecast one-day returns, explain what you should do at the open on days 6 and 7? (4 marks) you will c) If you are a trend follower, what is your view of market efficiency? Discuss how you could prove that the market is inefficient or efficient in this form. (4 marks)