The exponential smoothing forecast has the same value as the naïve forecast when α in the exponential smoothing model is equal to:
A)0
B)0.5
C)1
D)Insufficient information provided to determine answer

Question

Quizplus · Accepted Answer

The formula for exponential smoothing forecast with the given data point Yt and smoothing factor α is:
Ft+1 = αYt + (1-α)Ft
When α = 1, the forecast will be equal to the previous forecast. In other words, Ft+1 = Ft. This means that the forecast is equal to the naïve forecast, which is simply the previous observation. Therefore, the answer is C.

The Exponential Smoothing Forecast Has the Same Value as the Naïve