When the smoothing constant (α)is set to 1,then exponential smoothing is equivalent to ______.
A)naïve approach
B)weighted moving average
C)moving average
D)factor rating method

Question

Quizplus · Accepted Answer

When the smoothing constant (α) is set to 1 in exponential smoothing, it means that only the most recent observation will be used to forecast future values. This is equivalent to using the naïve approach, which also only takes the most recent observation as the forecast for the next period. Therefore, the correct choice is A, naïve approach. The other options (B, weighted moving average; C, moving average; and D, factor rating method) all involve more than one observation in forecasting future values.

When the Smoothing Constant (α)Is Set to 1,then Exponential Smoothing