Which of the following exponential smoothing constant values puts the same weight on the most recent time series value as does a four-period moving average?
A) α = .2
B) α = .25
C) α = .75
D) α = .8

Question

Quizplus · Accepted Answer

A four-period moving average gives equal weights to the four most recent time series values, which means that the weight of each observation is 1/4. Thus, we need to find α such that the weight of the most recent observation is 1/4. Using the formula for exponential smoothing, we have:
Weight of most recent observation = α(1-α)^3 = 1/4
After solving this equation, we get:
α = 0.25 or B

Which of the Following Exponential Smoothing Constant Values Puts the Same