A forecast based on average values as compared to original data will have
A) more variation, since real data is lost due to averaging
B) less variation because of the smoothing effect of averaging
C) about the same variation
D) A or B, depending upon the data
E) none of the above

Question

Quizplus · Accepted Answer

Averaging data tends to smooth out fluctuations, leading to forecasts with less variation compared to the original data. This is because outliers and short-term fluctuations are mitigated through the process of averaging, resulting in a smoother, more stable series.

A Forecast Based on Average Values as Compared to Original