The following table reports the percentages of stocks in a t

The following table reports the percentages of stocks in a typical portfolio in nine quarters from 2005 to 2007.

                  Quarter                               Stock %

                 1st-2005                                  29.8

                 2nd-2005                                 31.0

                 3rd-2005                                  29.9

                 4th-2005                                  30.1

                 1st-2006                                  32.2

                 2nd-2006                                 31.5

                 3rd-2006                                  32.0

                 4th-2006                                  31.9

                 1st-2007                                  30.0

B. What is the forecast of the percentage of stocks in a typical portfolio for the second quarter of 2007?

Solution

Since, there is no specific method mentioned here to calculate the forecast, I will be using the \' Moving Average \' Method.

In a moving average method, for each quarter of the forecast, average the previous three quarter\'s data:

So, for example if we are calculating the forecast for 4th Quarter of 2005, then it should be calculated as:

(29.8 + 31.0 + 29.9)/3 = 30.2

This value is very close to the original value.

Similarly, we use this methodology for calculating the forecast for 2nd Quarter of 2007

(32+32.9+30) = 31.63

So, the forecast of the percentage of stocks in a typical portfolio for the second quarter of 2007 shall be 31.63