BUSINESS ADMINISTRATION
BUSINESS ANALYTICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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forecast value in period t with weight
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actual value in period t + 1 with weight
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forecast value in period t-1 with weight
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actual value in period t with weight
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Detailed explanation-1: -The exponential smoothing forecast for any period is a weighted average of all the previous actual values for the time series. The mean squared error is influenced much more by large forecast errors than by small errors.
Detailed explanation-2: -The exponential smoothing calculation is as follows: The most recent period’s demand multiplied by the smoothing factor. The most recent period’s forecast multiplied by (one minus the smoothing factor). S = the smoothing factor represented in decimal form (so 35% would be represented as 0.35).
Detailed explanation-3: -Simple Exponential Smoothing The new forecast is equal to the previous forecast, plus an adjustment, which is the smoothing constant times the last forecast error (Actual – Forecast). In other words, we adjust the previous forecast by the fraction of the last forecast error to get the new forecast.
Detailed explanation-4: -Question: For exponential smoothing forecasting with an alpha of 0.1, the MSE (mean squared error) is 2.98.