Question

In simple exponential smoothing forecasting, to give higher weightage to recent demand information, the smoothing constant must be close to

• A. 1.0
• B. -1
• C. zero
• D. 0.5

Answer 1

The correct option is A 1.0

Simple exponential smoothing forecasting method

$F_{T+1}=F_T+\alpha (D_T-F_T)\alpha =1$

$\therefore F_{T+1}=D_T$

$\Rightarrow$ Higher weightage is given to recent demand if smoothing constant $\alpha =1.$

$\text{Note: As we know,}\alpha =\frac{2}{n+1}i.e.$

the value of $\alpha$ close to 1 has less smoothing effect and gives higher weightage to the recent data, while value of a close to 0 has greater smoothing effect and demand is less responsive to recent data.