Price Predictions Project
Overview and Rationale
This assignment is designed to give you hands-on experience in performing both
regression and time series forecasting. You will be given a particular real-life time series,
and are asked to perform regression for predictions and to perform a time series
forecasting. In addition, you are asked to perform a sensitivity analysis by using different
parameter values and calculating measures of error for each of those values.
Course Outcomes
This assignment is directly linked to the following key learning outcomes from the course
syllabus:
CO1: Use descriptive, Heuristic and prescriptive analysis to drive business strategies
and actions
CO3: Analyze the role of analytics in supporting decision making for various other
stakeholder groups within and outside of your organization
CO5: Utilize applied analytics and definitions of measures of success to provide a
strategic analytic roadmap for an organization
Assignment Summary
Download stock prices of PEPSI stock (PEP) and 4 other stocks from Jan 2018 to Feb
2020 (courtesy of Yahoo Finance). Use the data to predict March 2020 prices (March 2,
2020 to March 6, 2020). Your prediction may be for one day or for all five days. This
project consists of four parts.
Project Instructions:
1. Perform exponential smoothing forecasts on the main stock prices to forecast the
price for March 2020. Use successive values of 0.15, 0.35, 0.55, and 0.75 for the
smoothing parameter α. Calculate the MSE of each forecast, Use the MSEs of your
forecasts to determine the value of α that has provided the most accurate forecast.
Describe qualitatively as to why such a value of α has yielded the most accurate
forecast.
2. Use your exponential smoothing forecast with 𝜶=𝟎.75, and perform adjusted
exponential smoothing forecasts on the main stock prices to forecast the price for
March 2020. Use successive values of 0.15, 0.25, 0.45, and 0.85 for the trend
parameter β. Use the MSEs of your forecasts to determine the value of β that has
provided the most accurate forecast. Describe qualitatively as to why such a value of
β has yielded the most accurate forecast.
3. Perform a simple regression analysis of main stock prices versus periods (i.e., 1, 2,
3,…) to forecast the main stock value for March 2020. Calculate the MSE of this
forecast and compare its value with those obtained from parts (1) and (2) above.
The regression analysis should consist of the following additional details:
a. Coefficients of correlation and determination, and the interpretations of their
values
b. A histogram of the regression residuals, and the interpretation of its shape
c. A Chi-squared normality test of the residuals, and the interpretation of its
outputs
d. A Normal probability plot of the residuals
e. A scatter plot of residuals versus time to study their independency, and the
interpretation of the shape of the scatter plot
f. A scatter plot of residuals versus the predicted stock values to study their
homoscedasticity, and the interpretation of the shape of the scatter plot
4. Use 4 stock prices in addition to PEPSI to predict PEPSI prices in March 2020 (in
combination of the earlier methods in this assignment). Among the forecasting
methods or models that you have used in this project, what method has shown to be
actually the most accurate method in predicting the main stock price for March
2020?
Format & Guidelines
The report should follow the following format:
(i) Introduction
(ii) Analysis
(iii) Conclusion
And be 1000 - 1200 words in length, not including the title page, and presented in the APA
format.
Rubric
Category Above Standard Meets Standards Approaching
Standards Below Standards
R: Problem
Modeling &
Set-up
ALY6050-CO1
Completely and
concisely modeled the
problem in Excel (or
R) for each method
Accurately modeled
the problem in Excel
(or R) for each
method
Correctly modeled the
problem in Excel (or
R) for each method,
but the model lacks
detailed insight into
the problem or the
set-up is awkward.
Modeled the problem
in Excel (or R) for
each method, but
there are some gaps in
the problem modeling
and setup
R: Problem
Solution &
Accuracy
ALY6050-CO1
Efficiently obtained
correct and accurate
solutions in Excel (or
R) by using the
appropriate analytic
tools of the software
Obtained complete
and accurate
solutions in Excel (or
R) by using the
appropriate analytic
tools of the software
Obtained correct
solutions in Excel (or
R) using the
appropriate analytic
tools of the software,
but the application of
the tool is awkward.
Obtained a solutions
in Excel (or R) by
using the appropriate
analytic tools of the
software, but the
solution is not
complete.
Word/Report:
Problem
Description &
Introduction
ALY6050-CO3
Provides a thorough
and concise summary
of the problem
descriptions and
introduced the
problem using rich
and significant ideas
Provides an accurate
and succinct
summary of the
problem descriptions
and problem
introduction
Provides an accurate
summary of the
problem descriptions
and problem
introduction, but the
description is too
wordy or not succinct
Provided a summary of
the problem
descriptions and
problem introduction,
but it is inaccurate or
incomplete
Word/Report:
Description of
Problem
Analysis
ALY6050-CO3
ALY6050-CO5
Provides a thorough
and precise
description of the
analytic concepts and
theories used in
analyzing the problem
Accurately describes
the analytic concepts
and theories used in
analyzing the problem
Describes the analytic
concepts and theories
used in analyzing the
problem, but
description lacks
appropriate detail or
precision
Describes the
analytical concepts
and theories used in
analyzing the
problem, but
descriptions are
incorrect or the
analytical concepts
and theories are
incorrect
Word/Report:
Description of
Conclusions
ALY6050-CO5
Provides conclusions
and results obtained
in the project using a
high level of critical
thinking and
reasoning
Provides relevant
conclusions and
results obtained in the
project that reflect
critical thinking and
reasoning
Provides conclusions
and results obtained
in the project, but not
all conclusions or
results are relevant to
the problem or not all
conclusions reflect
good reasoning
Provides conclusions
and results obtained
in the project, but they
are irrelevant and
reflect a lack of critical
thinking
Category Above Standard Meets Standards Approaching
Standards Below Standards
Word/Report:
Writing
Mechanics,
Title Page, &
References
Completely free of
errors in grammar,
spelling, and
punctuation; and
completely correct
usage of title page,
citations, and
references. The report
contains a minimum
of 1000 words
There are no
noticeable errors in
grammar, spelling,
and punctuation; and
completely correct
usage of title page,
citations, and
references. The report
contains a minimum
of 1000 words
There are very few
errors in grammar,
spelling, and
punctuation; and
completely correct
usage of title page,
citations, and
references. The report
contains a minimum
of 1000 words
There are more than
five errors in
grammar, spelling,
and punctuation; or
the usage of title page,
citations, and
references are
incomplete; or the
report contains less
than 1000 words