Question

Which of the following exponential smoothing constant values puts the same weight on the most recent time series value as does a 5-period moving average?

a. α = 0.2
b. α = 0.25
c. α = 0.75
d. α = 0.8

Answer 1

The correct exponential smoothing constant that puts the same weight on the most recent time series value as a 5-period moving average is α = 0.2. Option a.

Step-by-step explanation:

The student is asking about the value of the exponential smoothing constant that would result in the same degree of smoothing as a 5-period moving average.

In exponential smoothing, the formula for the smoothing constant (α) is such that the sum of the weights equals 1. For a 5-period moving average, each period would have an equal weight of 1/5 or 0.20. Therefore, the exponential smoothing constant value equivalent to a 5-period moving average is α = 0.2.

Decision: a. α = 0.2

Reason for the decision: Because a 5-period moving average gives equal weight of 0.20 to each period, and we are looking for an equivalent weight in the exponential smoothing constant.

Conclusion (write out in a complete sentence): The correct answer is α = 0.2, as it matches the weight of a 5-period moving average. Option a.