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Use exponential smoothing to make the prediction

The following table lists the worldwide shipments of personal computers (in thousands) according to Dataquest.

Year Shipments (in thousands)
1990 23,738
1991 26,966
1992 32,411
1993 38,851
1994 47,894
1995 60,171
1996 71,065
1997 82,400
1998 97,321
(a) Use exponential smoothing to determine the forecast of shipments for the year 1999. Use the actual shipments for 1990 as the starting forecast for 1991. Use a smoothing constant of ? = 0.4.
(b) Plot the data, fit a trend line, display equation and R2 on the chart and discuss the strength of prediction of the regression model. Note: Use 1990 = 1, 1991 = 2, and so on to get more accurate equation.
(c) Use the regression model to predict the shipments for the years 1992 through 1999.
(d) Which forecasting method would you prefer to use and why? Note: Compute MAPE for the two forecasting methods to compare the accuracy for the period 1992-1998.

Solution Preview

I also did step of (a) and those values are in column G. Please check if it is consistent with yours. For (b), I plotted the trend line in the excel ...

Solution Summary

In this solution, an example for exponential smoothing for forecasting is provided. In addition, comparison between exponential smoothing and linear regression is made based on MAPE.