Which statement is correct regarding forecasting using an exponential smoothing model?
A)A model with low α is more responsive to new data than a model with high α.
B)Increasing α will typically increase the forecast accuracy.
C)As α increases, more weight is put on recent data.
D)When data have an upward trend, the forecasts will have an upward bias.

Question

Quizplus · Accepted Answer

Exponential smoothing models assign more weight to recent data by using a smoothing parameter, α. Therefore, as α increases, more weight is put on recent data. Option A is incorrect because a model with high α is more responsive to new data. Option B is incorrect because increasing α may result in overfitting the model to recent data, leading to poor forecast accuracy. Option D is incorrect because exponential smoothing can handle an upward trend by incorporating a trend component into the model.

Which Statement Is Correct Regarding Forecasting Using an Exponential Smoothing