Forecasting, Weighted Averages: Various Questions
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1. With exponential smoothing, does a higher alpha make the forecast MORE or LESS responsive to changes?
2. With a weighted moving average forecast, to which period is the heaviest weight applied?
3. Distinguish between the following: seasonal variation, cycles, trends, and random variation.
4. Distinguish between trend analysis and causal or associative forecasting
5. How is the accuracy of a forecasting method determined?
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1. With exponential smoothing, does a higher alpha make the forecast MORE or LESS responsive to changes?
The smoothing constant, , is assigned a low value if more weight is to be assigned to past data. On the other hand, the smoothing constant, , is assigned a high value if more weight is to be assigned to recent data.
The higher alpha makes the forecast MORE responsive to sudden changes.
of 0.5 is very responsive. 1.0 gives 100% of the weight to the prior period, and gives the same results as a prior period calculation. 0.0 eliminates the prior period from the analysis.
2. With a weighted moving average forecast, to which period is the heaviest weight applied?
Generally in a weighted moving average forecast, the most recent period is assigned the heaviest weight.
3. Distinguish between the following: seasonal variation, cycles, trends, and random variation.
Seasonal variation: Seasonality is a pattern of the demand fluctuation above or below the trend line that is repeated every year.
Cycle: A movement, up or ...
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