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Introduction
Counter: Consumer Products
1 year data from 1/10/2011 31/10/2012 Objective: To determine the best duration of data to forecast the market price for the given company
Methodology
Return -the percentage growth in the value of an asset Mean of Returns -the average of the returns Volatility the inconsistency/fluctuation/varies of the market prices Drift - The parameter is called the drift rate, the expected return or the growth rate of the asset
Standard Deviation -is a measure of how spread out numbers are based on the sample data
Steps
1. 2. Find the returns Calculate the mean and the standard deviation of the data sample (this values will be the value for drift and volatility for duration of 1 year) Find the drift and volatility for 6 months ( t=1/127),3 months ( t=1/62), 1 month ( t=1/22), 3 weeks ( t=1/15), 2 weeks ( t=1/10), 1 week ( t=1/5) Find the forecast prices for each duration Compare the actual price and the forecast price Plot the graphs for each duration
3.
4. 5. 6.
7.
Results
4.2 4.18 4.16 4.14 4.12 4.1 4.08 4.06 4.04 4.02 4 1-Nov-12 8-Nov-12 15-Nov-12 22-Nov-12 Actual Price Forecast Price 4.25 4.2 4.15 4.1 4.05 4 3.95 3.9 3.85 3.8 3.75 1-Nov-12 3-Nov-12 5-Nov-12 7-Nov-12 9-Nov-12 11-Nov-12 13-Nov-12 15-Nov-12 17-Nov-12 19-Nov-12 21-Nov-12 23-Nov-12 Actual Price Forecast Price
Conclusion
The graph of the forecasting prices of Ajinomoto (M) Bhd by using the drift and volatility for 3 weeks shows that the forecasting price values are very near to the actual data. The Sum Squared Error for forecast prices using 3 weeks duration also has the lowest value which is 0.006803. Although it is not possible to draw conclusions about the correctness of the forecasting prices solely using the sum squared errors, but it is sufficient enough because forecasting prices can be made to closely fit the data set proven by the graph. Further study may be necessary to determine it however, a smaller residual sum of squares is ideal.