As a consultant, you have been thinking about choosing the "right" alpha (smoothing constant) for forecasting using exponential smoothing. Which of the following is most accurate about alpha?
A. If alpha is high, speed of reaction to changes in actually low.
B. If a firm produces standard product with relatively stable demand, alpha should be small.
C. Products experiencing growth should be assigned higher alpha value.
D. Alpha could be more than 1.0, and in this case (1-alpha) will become negative to make up for it.
A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice B and C

Question

As a consultant, you have been thinking about choosing the "right" alpha (smoothing constant) for forecasting using exponential smoothing. Which of the following is most accurate about alpha? 
A. If alpha is high, speed of reaction to changes in actually low.
B. If a firm produces standard product with relatively stable demand, alpha should be small.
C. Products experiencing growth should be assigned higher alpha value.
D. Alpha could be more than 1.0, and in this case (1-alpha) will become negative to make up for it.
A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice B and C

Quizplus · Accepted Answer

A small alpha is suitable for stable demand to avoid overreacting to random fluctuations, while a higher alpha is better for products experiencing growth to quickly adapt to changes.

As a Consultant, You Have Been Thinking About Choosing the "Right