The management of a company specializing in securities analysis has been using two forecasting methods to follow a new stock issue. Forecast Method $$\begin{array} { | l | l | l | l | }
\hline \text { Month } & \begin{array} { c }
\text { Exponential } \
\text { Smoothing }
\end{array} & \text { Judgmental } & \begin{array} { c }
\text { Actual } \
\text { Price }
\end{array} \
\hline 1 & 48 & 50 & 51 \
2 & 50 & 52 & 53 \
3 & 51 & 55 & 54 \
\hline
\end{array}$$ Which one of the following statements is TRUE?
A) Based on MAD, the judgmental method is more accurate.
B) Based on CFE, the bias of the judgment forecasts is larger than the bias of the exponential smoothing forecasts.
C) Based on MAD, the exponential smoothing approach is more accurate.
D) Based on CFE, the bias of the exponential smoothing forecasts is steadily improving.

Question

The management of a company specializing in securities analysis has been using two forecasting methods to follow a new stock issue. Forecast Method $$\begin{array} { | l | l | l | l | } 
\hline \text { Month } & \begin{array} { c } 
\text { Exponential } \
\text { Smoothing }
\end{array} & \text { Judgmental } & \begin{array} { c } 
\text { Actual } \
\text { Price }
\end{array} \
\hline 1 & 48 & 50 & 51 \
2 & 50 & 52 & 53 \
3 & 51 & 55 & 54 \
\hline
\end{array}$$ Which one of the following statements is TRUE?
A) Based on MAD, the judgmental method is more accurate.
B) Based on CFE, the bias of the judgment forecasts is larger than the bias of the exponential smoothing forecasts.
C) Based on MAD, the exponential smoothing approach is more accurate.
D) Based on CFE, the bias of the exponential smoothing forecasts is steadily improving.

Quizplus · Accepted Answer

The Mean Absolute Deviation (MAD) for the judgmental method is lower than that for the exponential smoothing method, indicating that the judgmental method is more accurate.

The Management of a Company Specializing in Securities Analysis Has