In a simple exponential smoothing model, which of the following statements is true?
A) The forecast values are determined by computing a moving average of the previous 4 data periods if we are working with quarterly data.
B) The larger the smoothing constant, the more smoothing that takes place in the model.
C) If the data contain a lot of random or irregular ups and downs, then a larger smoothing constant should be used in an attempt to model these fluctuations.
D) More smoothing of the data will take place if a smoothing constant value close to zero is used.

Question

Quizplus · Accepted Answer

In a simple exponential smoothing model, a smaller smoothing constant (closer to zero) results in more smoothing because it gives more weight to older observations, thus dampening the effect of more recent fluctuations.

In a Simple Exponential Smoothing Model, Which of the Following