if value of smoothing constant (alpha) is taken as 0, what is the meaning of it? no fluctuations of current period are considered. complete fluctuations of current period are considered. some fluctuations of current period are considered. none of the above
Answers
Continual review and updating in light of new data is a forecasting technique called second-guessing.
Cyclical influences on demand are often expressed graphically as a linear function that is either upward or downward sloping
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Answer:
Value of α closer to zero means no fluctuations of current period.
Explanation:
Exponential smoothing is a forecasting technique, used to analyze the time series data with the help of exponential window function.
Forecasts are calculated using weighted averages, done by attaching larger weights to recent observations and the weights exponentially decrease as the observations go into the past.
The controlling input of the exponential smoothing calculation is called smoothing constant(α).
- It determines the level at which previous observations influence the forecast.
- if the value of the smoothing constant is larger, then the smoothing gets reduced.
- Value of α close to 1 has less smoothing effect and give greater weight to recent observations in the data.
- And the value of α to zero has a greater smoothing effect and are less responsive to recent observations.