Question

Consider a scenario and discuss the nature of the object to be forecast, forecast type, and forecast horizon.

You work for Serotech Orgo Analytics, a highly specialized mutual fund investing exclusively in airline stocks. The stocks held by the fund are chosen based on your recommendations. You learn that a newly rich oil-producing company has requested bids on a huge contract to deliver 30 state of the art fighter planes, and that only two companies have submitted bids. The stock of the successful bidder is likely to rise.

Answer 1

Answer: : The stock of the successful bidder might or might not raise since there are only 2 bidders for the state of the art fighter planes. Also, the horizon of getting a contract until the supply is made is usually high , and hence if I have to recommend investments, I would recommend on investing a 30% on this company that has won the bid and 70% in other supplier companies that supply parts to manufacture fighter planes. However, it would also make sense to say that this forecast type would be very short lived as it takes away an ideology of large competition with more bidders and equal paying ground.