If a researcher is using exponential smoothing and determines that the forecast for the next period (F_{t + 1})is the average of the actual value for the previous period (X_t)and the forecast value for the previous period (F_t), then α = ______. A)0.35 B)0.40 C)0.50 D)0.55 E)there is not enough information to determine the value of α

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Quizplus · Accepted Answer

In exponential smoothing, the forecast for the next period is calculated as $F_{t+1} = \alpha \cdot X_t + (1 - \alpha) \cdot F_t$, where $F_{t+1}$ is the forecast for the next period, $X_t$ is the actual value for the previous period, $F_t$ is the forecast for the previous period, and $\alpha$ is the smoothing constant. If the forecast for the next period is the average of the actual value for the previous period and the forecast value for the previous period, it means that $\alpha = 0.5$, because the formula simplifies to taking the average when $\alpha = 0.5$.

If a Researcher Is Using Exponential Smoothing and Determines That