The closer the value of $\alpha$ is to 1 ,
A) the slower the pace of adjustment to forecast errors
B) the faster will be the pace of adjustment to forecast errors
C) greater will be the smoothing
D) lesser will be the smoothing
E) B and D

Question

Quizplus · Accepted Answer

The value of $\alpha$ (alpha) in smoothing equations, such as those used in exponential smoothing forecasts, determines the weight given to the most recent observation relative to past observations. When $\alpha$ is closer to 1, it means more weight is given to the most recent data, leading to a faster adjustment to forecast errors (B) and lesser smoothing of the data (D), as less emphasis is placed on older observations.

The Closer the Value Of α\alphaα Is to 1 , A) the Slower the Pace of

The Closer the Value Of $\alpha$ Is to 1 ,
A) the Slower the Pace of