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[parent] moving average (Definition)

A moving average is a sequence of arithmetic means taken over a fixed interval moved along consecutive data points from an infinite (or sufficiently large) set of data points. That is, given a sequence $ a_x, \ldots, a_{x + k}$ and an interval $ n$, the average

$\displaystyle \frac{a_{i - \frac{n}{2}} + \ldots + a_{i + \frac{n}{2}}}{n}$
is taken for each value $ (x + n) < i < (x + k - n)$.

Plotting a moving average can help to smooth out an extremely jagged curve so as to allow one to see larger patterns. For example, take this plot of the number of (nondistinct) prime factors function $ \Omega(n)$ for $ 20 < n < 120$:

\includegraphics{BigOmegaPlot}

If instead we plot a moving average with an interval of 40, we get a smoother curve:

\includegraphics{BigOmegaMovAvgPlot}

Though in all honesty, moving averages are not all that useful in number theory. They are much used, however, in statistics and fields using statistics, such as physics and economics. In economics, for example, a moving average over an interval of say, 3 months, helps investors worry less about the wild hectic fluctuations in a day of trading and focus on the overall direction of a given stock. In physics, to give another example, a yearly moving average of parts per million of carbon dioxide in the atmosphere of the Earth smooths out the yearly dips of summer to show that overall carbon dioxide is going up, contributing to significant global warming.




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Cross-references: focus, wild, fields, statistics, number theory, curve, smooth, infinite, points, consecutive, interval, fixed, arithmetic means, sequence

This is version 6 of moving average, born on 2007-02-24, modified 2007-04-12.
Object id is 8976, canonical name is MovingAverage.
Accessed 1565 times total.

Classification:
AMS MSC11-00 (Number theory :: General reference works )
 26D15 (Real functions :: Inequalities :: Inequalities for sums, series and integrals)
 62M10 (Statistics :: Inference from stochastic processes :: Time series, auto-correlation, regression, etc.)
 91B84 (Game theory, economics, social and behavioral sciences :: Mathematical economics :: Economic time series analysis)

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Apple's moving average "spiking sharply higher" while price shows downward trend by Mravinci on 2007-04-19 15:53:59
What do you make of this?

http://www.tradingmarkets.com/.site/news/MOMENTUM/534784/

"(RTTNews) - Apple Computer Inc. (AAPL | charts | news | PowerRating) gapped down a the open and has been climbing steadily . the stock is suddenly spiking higher and is bouncing off it's 50 day moving average."

I'm looking at it with Google Finance in 3-month view and I don't see how the moving average could be "spiking." If anything, a moving average would show that you should've sold Apple a couple of weeks ago and cut your losses.
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Images still not showing by Mravinci on 2007-03-16 14:51:14
By now I hope you've had one of your grandkids come over and fix your Photoshop, perhaps you could get the illustrations of moving averages to show up. Have you tried uploading your images to your GeoCities website first and then bringing them to PlanetMath from GeoCities? That might solve the filename problem, but other problems might remain.
[ reply | up ]
LaTeX rendering problem by PrimeFan on 2007-02-24 19:23:02
I don't know why the LaTeX is not rendering. I tried removing the pictures. I tried copying the syntax from the Poincare entry more closely. I even tried taking out the statement about global warming. Nothing worked.

As for the images being PNG rather than EPS, Photoshop Elements keeps crashing on me for some reason.
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