If the random variability in a time series is great,a small value of the smoothing constant is preferred so that we do not overreact and adjust our forecasts too quickly.

Question

If the random variability in a time series is great,a small value of the smoothing constant is preferred so that we do not overreact and adjust our forecasts too quickly.​

Quizplus · Accepted Answer

A small smoothing constant implies a higher weightage to past values in forecasting. This can be helpful in reducing the impact of random variability on the forecasts, ensuring that we do not overreact to short-term fluctuations. Therefore, the statement is true.

If the Random Variability in a Time Series Is Great,a