Question

The value of the smoothing constant used in exponential smoothing will be:

• A. Between -1 and 1
• B. Between 0 and 1
• C. Between -1 and 0
• D. Between 0 and infinity

Hint:

In exponential smoothing, choose the smoothing constant carefully. A value close to 1 gives more weight to recent data, while a value close to 0 results in a more stable forecast.

Answer 1

The Correct Option is B

In exponential smoothing, the smoothing constant, typically denoted as \(\alpha\), is a value between 0 and 1. It determines the weight given to the most recent observation compared to the previous smoothed value. A higher value of \(\alpha\) gives more weight to recent observations, making the forecast more sensitive to recent changes, while a lower value makes the forecast more stable by giving more weight to past data. Values of \(\alpha\) outside the range of 0 to 1 would make the smoothing process invalid, as the weightings would not make sense.