In the context of a fairly stable time series with relatively little random variability, which of the following statements is true of single exponential smoothing (SES)?
A) Values of the smoothing constant larger than 0.5 place more emphasis on recent data.
B) Exponential smoothing models completely forget past data if the smoothing constant is strictly between 0 and 1.
C) Typical values for the smoothing constant are in the range of 1 to 1.5.
D) Values of the smoothing constant smaller than 0.1 allow a forecast to react faster to changing conditions.

Question

Quizplus · Accepted Answer

Values of the smoothing constant larger than 0.5 indeed place more emphasis on the most recent data, as the smoothing constant (alpha) determines the weight given to the most recent observation in the time series. A higher alpha means more weight on recent data, making the forecast more responsive to recent changes.

In the Context of a Fairly Stable Time Series with Relatively