Question

Which of the following statements about exponential smoothing as a time series forecasting technique is true?

a. The exponential smoothing technique requires access to historical data for at least a five-year period.
b. The exponential smoothing technique should be used only by hospitality businesses that experience seasonal sale patterns.
c. The exponential smoothing technique is most useful when precise forecasts are required.
d. The exponential smoothing technique is most useful when short-term forecasts are needed.

Answer 1

Exponential smoothing is most useful for short-term forecasting and does not require five years of historical data, nor is it limited to hospitality businesses with seasonal sales patterns. Option d) is correct.

Step-by-step explanation:

The correct statement about exponential smoothing as a time series forecasting technique is: d. The exponential smoothing technique is most useful when short-term forecasts are needed.

Exponential smoothing is a rule of thumb technique for smoothing time series data, particularly for repeatedly applying a simple smoothing factor to the unsmoothed data points to produce a forecast. It can be used effectively for short-term forecasting; it does not require a minimum of five years of data and can be used by any type of business, not just hospitality businesses with seasonal sales patterns. It may not always provide "precise" forecasts, especially in situations where the data contains trends, seasonality, or irregular cycles that simple exponential smoothing does not account for.