Suppose that you are using the exponential smoothing forecasting method, and this period's forecast (F_t) was 100% accurate (i.e., no error). If α = .5, which of the following is definitely true? A) Next period's forecast will also be 100% accurate. B) Next period's forecast equals this period's actual. C) This period's forecast must be thrown out, and next period's forecast equals F_t-1 + α (A_t-1 α − F_t-1). D) Next period's forecast equals 50% of this period's forecast. E) Next period's forecast equals 50% more than this period's forecast.

Question

Quizplus · Accepted Answer

When the actual value equals the forecast, the forecast for the next period will be equal to the actual value multiplied by the smoothing constant (α) plus (1-α) times the current forecast. Therefore, next period's forecast will equal this period's actual value.

Suppose That You Are Using the Exponential Smoothing Forecasting Method