Question 1

In a recent meeting, the marketing manager for a large hardware company stated that he needed to have a forecast prepared for the next three months. The three-month period is called:

Accepted Answer

The term "forecasting horizon" refers to the future time period for which a forecast is prepared. In this context, the three-month period for which the forecast is needed is called the forecasting horizon.

Question 2

In a single exponential smoothing model, one smoothing constant is used to weigh the historical data, and the model is of primary value when the data do not exhibit trend or seasonal components.

Accepted Answer

Single exponential smoothing is most effective for forecasting data without trends or seasonal patterns, using one smoothing constant to give exponentially decreasing weight to older observations.

Question 3

Because simple exponential smoothing models require a starting point for the first period forecast that will be arbitrary, it is important to have as much data as possible to dampen out the effect of the starting point.

Accepted Answer

Simple exponential smoothing models rely heavily on the initial forecast value, which can be somewhat arbitrary. Having a larger dataset helps mitigate the impact of this initial choice, as the model can adjust more accurately over time with more data points.

Question 4

The Morgan Company is interested in developing a forecast for next month's sales. It has collected sales data for the past 12 months.  After analyzing these data, if the company wishes to use double exponential smoothing with alpha = 0.20 and beta = 0.20, the starting values for the constant process and the trend process can be derived from a linear trend regression model by using the intercept and slope coefficient respectively.

Accepted Answer

The answer of The Morgan Company is interested in developing...

Question 5

If you suspect that your time-series data has a strong downward trend, you should set the beta smoothing constant at value fairly close to negative 1.0

Accepted Answer

The beta smoothing constant in time-series analysis, such as in exponential smoothing models, should be between 0 and 1. It does not take negative values. Adjusting it closer to 1 would increase responsiveness to trend changes, not set a direction of the trend.

Question 6

Prior to conducting double exponential smoothing a simple linear regression is conducted and the trend equation is = 42 + 38.3t, so the smoothed constant process value should be C0 = 38.3 and the smoothed trend value should be T0 = 42.

Accepted Answer

In double exponential smoothing, the constants for the smoothed process value (C0) and the smoothed trend value (T0) are not directly derived from the coefficients of a simple linear regression equation. Instead, they are initialized based on the data or set through optimization. The coefficients from a linear regression (42 and 38.3 in this case) represent the intercept and slope of the trend line, respectively, and do not directly correspond to the initial constants for double exponential smoothing.

Question 7

Double exponential smoothing is used instead of single exponential smoothing when extra smooth forecasts are desired.

Accepted Answer

Double exponential smoothing is used to account for trends in the data, not just to achieve extra smooth forecasts. Single exponential smoothing does not account for trends.

Question 8

The process of selecting the forecasting technique to use in a particular application is called:

Accepted Answer

Model specification involves choosing the appropriate forecasting technique or model to use based on the characteristics of the data and the specific goals of the forecasting task.

Question 9

In establishing a single exponential smoothing forecasting model, a starting point for the forecast value for period 1 is required. One method for arriving at this starting point is to use the first data point as the forecast for that period. If we do that, then the first data point should be ignored when computing measures of forecast error.

Accepted Answer

Using the first data point as the initial forecast means it is not a true forecast but rather a baseline, so it should be excluded from error calculations to avoid skewing the error metrics.

Question 10

The owners of Hal's Cookie Company have collected sales data for the past 8 months. These data are shown as follows:  Using a starting forecast in period 1 of 100, the forecast bias over periods 2-8 is negative when a single exponential smoothing model is used with a smoothing constant of 0.20

Accepted Answer

The answer of The owners of Hal's Cookie Company have...

Question 11

In a single exponential smoothing model, a large value for the smoothing constant will result in greater smoothing of the data than will a smoothing constant close to zero.

Accepted Answer

A large value for the smoothing constant (close to 1) gives more weight to the most recent observation, resulting in less smoothing. A smoothing constant close to zero results in greater smoothing because it gives more weight to past observations.

Question 12

The owners of Hal's Cookie Company have collected sales data for the past 8 months. These data are shown as follows:  Using a smoothing constant equal to 0.20 and starting forecast in period 1 of 100, the forecast value for period 9 is approximately 104.2.

Accepted Answer

The answer of The owners of Hal's Cookie Company have...

Question 13

If a time-series plot indicates that the data do not appear to exhibit a trend, then a double exponential smoothing model would likely be the most appropriate to use rather than simple exponential smoothing model.

Accepted Answer

Double exponential smoothing is used when the data shows a trend. If there is no trend in the data, simple exponential smoothing is more appropriate.

Question 14

The Morgan Company is interested in developing a forecast for next month's sales. It has collected sales data for the past 12 months.  Assuming that the company plans to use double exponential smoothing with starting values for the smoothed constant process value and smoothed trend value of 98.97 and 13.16 respectively, the MAD value for periods 2-12 is greater when alpha = 0.20 and beta = 0.20 than when alpha = 0.10 and beta = 0.10.

Accepted Answer

The answer of The Morgan Company is interested in developing...

Question 15

If a smoothing model is applied for a stable time series, a smoothing constant of 0.20 would be an appropriate value.

Accepted Answer

A smoothing constant of 0.20 is considered appropriate for a stable time series because it provides a moderate level of smoothing, allowing for some responsiveness to changes while still smoothing out random fluctuations.

Question 16

In a double smoothing model, the second smoothing constant is introduced to account for the trend in the data if one exists.

Accepted Answer

The second smoothing constant in a double smoothing model is indeed introduced to account for the trend in the data, allowing the model to adjust not just for the level of the series but also for its direction and speed of change.

Question 17

If a time series contains substantial irregular movement, the smoothing constant for a single exponential smoothing model that is close to 1.0 will result in forecasts that are not as smoothed out as those that would occur if a smaller smoothing constant was used.

Accepted Answer

A smoothing constant close to 1.0 in a single exponential smoothing model places more weight on the most recent observations, resulting in less smoothing and allowing the forecasts to respond more to recent changes, including irregular movements. A smaller smoothing constant would result in more smoothing by giving more weight to past observations.

Question 18

The owners of Hal's Cookie Company have collected sales data for the past 8 months. These data are shown as follows:  Using a smoothing constant of 0.4, the forecast value for period 3 is 112.

Accepted Answer

The answer of The owners of Hal's Cookie Company have...

Question 19

In a double smoothing model, large values for the two smoothing constants will result in greater smoothing of the time series.

Accepted Answer

In a double smoothing model, large values for the two smoothing constants actually result in less smoothing and more responsiveness to recent changes in the data.

Question 20

The Morgan Company is interested in developing a forecast for next month's sales. It has collected sales data for the past 12 months.  After analyzing these data, if the company wishes to use exponential smoothing, it should employ a single smoothing model since there is evidence of a linear trend in the data.

Accepted Answer

The answer of The Morgan Company is interested in developing...

Quiz 16: Analyzing and Forecasting Time-Series Data

In a recent meeting, the marketing manager for a large hardware company stated that he needed to have a forecast prepared for the next three months. The three-month period is called:

In a single exponential smoothing model, one smoothing constant is used to weigh the historical data, and the model is of primary value when the data do not exhibit trend or seasonal components.

Because simple exponential smoothing models require a starting point for the first period forecast that will be arbitrary, it is important to have as much data as possible to dampen out the effect of the starting point.

If you suspect that your time-series data has a strong downward trend, you should set the beta smoothing constant at value fairly close to negative 1.0

Prior to conducting double exponential smoothing a simple linear regression is conducted and the trend equation is = 42 + 38.3t, so the smoothed constant process value should be C0 = 38.3 and the smoothed trend value should be T0 = 42.

Double exponential smoothing is used instead of single exponential smoothing when extra smooth forecasts are desired.

The process of selecting the forecasting technique to use in a particular application is called:

The owners of Hal's Cookie Company have collected sales data for the past 8 months. These data are shown as follows: Using a starting forecast in period 1 of 100, the forecast bias over periods 2-8 is negative when a single exponential smoothing model is used with a smoothing constant of 0.20

In a single exponential smoothing model, a large value for the smoothing constant will result in greater smoothing of the data than will a smoothing constant close to zero.

The owners of Hal's Cookie Company have collected sales data for the past 8 months. These data are shown as follows: Using a smoothing constant equal to 0.20 and starting forecast in period 1 of 100, the forecast value for period 9 is approximately 104.2.

If a time-series plot indicates that the data do not appear to exhibit a trend, then a double exponential smoothing model would likely be the most appropriate to use rather than simple exponential smoothing model.

If a smoothing model is applied for a stable time series, a smoothing constant of 0.20 would be an appropriate value.

In a double smoothing model, the second smoothing constant is introduced to account for the trend in the data if one exists.

If a time series contains substantial irregular movement, the smoothing constant for a single exponential smoothing model that is close to 1.0 will result in forecasts that are not as smoothed out as those that would occur if a smaller smoothing constant was used.

The owners of Hal's Cookie Company have collected sales data for the past 8 months. These data are shown as follows: Using a smoothing constant of 0.4, the forecast value for period 3 is 112.

In a double smoothing model, large values for the two smoothing constants will result in greater smoothing of the time series.