Answered: Define the term Exponential smoothing?

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Define the term Exponential smoothing?

Expert Solution

Step 1

Let’s understand what is meant by Exponential Smoothing.

Exponential Smoothing: It can be defined as the time series which decreasing weighs exponentially from newer to older. Simply said that older is the data lesser will be the priority and newer the data more relevant it is. It is basically used to make short term forecasts rather long term.

There are types of exponential smoothing as:

Simple Exponential smoothing,
Double Exponential smoothing and
Triple Exponential smoothing.

Step 2

Each of the above has different formulas:

Formulas:

1. Simple Average smoothing:

S_t = αy_t-1 + (1 – α) S_t-1

Wherein the term α = the smoothing constant, a value from 0 to 1.

t = time period

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