Which of the following is not an advantage of exponential smoothing?
A)It enables you to perform one-period ahead forecasting.
B)It enables you to perform more than one-period ahead forecasting.
C)It enables you to smooth out seasonal components.
D)It enables you to smooth out cyclical components.

Question

Quizplus · Accepted Answer

Exponential smoothing is a forecasting technique that uses a weighted average of past observations, with the weights decaying exponentially as the observations get older. One of its advantages is that it enables one-period ahead forecasting, meaning that it can be used to predict future values based on the most recent observation. Another advantage is that it can smooth out random fluctuations in the data, allowing for a better understanding of underlying trends. Additionally, exponential smoothing can be used to smooth out seasonal and cyclical components, making it useful for forecasting in industries like retail or tourism. However, exponential smoothing is typically not well-suited for more than one-period ahead forecasting, as the weights of earlier observations decay rapidly and can cause the forecast to become inaccurate for future periods.

Which of the Following Is Not an Advantage of Exponential