Estimation of Intel Stock Using Moving Average and Exponential Smoothing Techniques
I collected the monthly adjusted closing prices for Intel Corporation (INTC) stocks for
the sixty-month period January 1, 2005 to December 31, 2009. The close price obtained from
the website http://finance.yahoo.com is adjusted for dividends and splits. In this report I will
produce an estimated stock price for January 2010 using moving average and exponential
smoothing techniques. Table 1 summarizes the adjusted closing prices for Intel stocks over the
sixty-month period. Graph 1 displays the stock prices over the sixty-month period.
Table 1. Summary Measures for Intel Corporation's Adjusted
Closing Stock Prices, January 2005 - December 2009
Mean
19.5388
Standard Deviation
3.10985
Sample Variance
9.67115
Range
12.67
Minimum
12.35
Maximum
25.02
Source: http://finance.yahoo.com
Graph 1. Scatter Plot of Intel's Stock Price
30
25
20
Stock Price
15
($)
Adj Close
10
5
0
1/14/2004 5/28/2005 10/10/2006 2/22/2008 7/6/2009 11/18/2010
Time: Jan. 2005 - December 2009
I calculated an estimated stock price for January 2010 using moving average as well as
exponential smoothing techniques with a smoothing constant of 0.2 and 0.8. I also calculated the
mean square error (MSE) and the mean absolute deviation (MAD) under both techniques to
forecast the most reliable estimate. Both exponential smoothing techniques produced a more
reliable estimate of the stock price than the moving average method. This was determined
because the exponential smoothing methods produced a lower MSE and MAD than the moving
average method. In addition, the smoothing constant of 0.8 produced a lower MSE and MAD
than a constant of 0.2 and therefore forecasted a more precise estimate of the stock price. Table
2 shows each time series analysis method and their corresponding MSE, MAD, and stock price
estimate values.
Table 2. Time Series Data Using Moving Average and Exponential Smoothing Methods
Moving Average
11.57
2.88
MSE
MAD
Stock Price Estimate
Exponential Smoothing, α = 0.2
6.35
2.04
$16.86
$18.42
Exponential Smoothing, α = 0.8
2.66
1.29
$20.00
Conclusively, the exponential smoothing method with a smoothing constant of 0.8
forecasted an adjusted closing stock price of $20.00 (compared to a $16.86 estimate using a
moving average and an $18.42 estimate using exponential smoothing with a smoothing constant
of 0.2). This was the closest estimate to the actual adjusted closing stock price of Intel’s stock for
January 2010 of $19.25.