Which of the following is true of the exponential smoothing method?
A) It does not incorporate new observations into existing forecasts.
B) It weighs all recent observations equally.
C) It assigns exponentially decreasing weights to older observations.
D) It does not use all available observations in making a forecast.

Question

Quizplus · Accepted Answer

The exponential smoothing method assigns exponentially decreasing weights to older observations based on a smoothing parameter. This allows for more recent observations to have a greater impact on the forecast than older observations. Therefore, option C is true. Options A and D are incorrect as exponential smoothing does incorporate new observations and uses all available observations in making a forecast. Option B is incorrect as not all recent observations are weighed equally in exponential smoothing.

Which of the Following Is True of the Exponential Smoothing