Question

The time series showing the sales of a particular product over the past 12 months is contained in the Excel Online file below. Construct a spreadsheet to answer the following questions.

1. Use a=0.2 to compute the exponential smoothing forecasts for the time series (to 2 decimals).

   Month	Time-Series Value	Forecast
   1	105
   2	130
   3	125
   4	100
   5	90
   6	120
   7	150
   8	135
   9	95
   10	75
   11	100
   12	105
   13

2. Use a smoothing constant of a=0.5 to compute the exponential smoothing forecasts (to 2 decimals).

   Month	Time-Series Value	Forecast
   1	105
   2	130
   3	125
   4	100
   5	90
   6	120
   7	150
   8	135
   9	95
   10	75
   11	100
   12	105
   13

   Compute MSE (to 2 decimals).

   MSE ( a= 0.2 ) : (___)
   MSE ( a = 0.5) : (___)

Month	Time-Series Value
1	105
2	130
3	125
4	100
5	90
6	120
7	150
8	135
9	95
10	75
11	100
12	105
13

Answer 1

Formula for exponential smoothing forecast

where

is the forecast demand for the time t

is the smoothing constant

is the actual value for time t-1

is called the damping factor

is the forecast value for the time t-1

We will now put the formula in Excel.

Formula for MSE (Mean Square Error)

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