Question

From the choice of simple moving average, weighted moving average, exponential smoothing, and linear regression analysis, which forecasting technique would you consider the most accurate?

Answer 1

The most accurate forecasting technique varies by context; options include simple moving average, weighted moving average, exponential smoothing, and linear regression analysis. Analytical techniques like regression often offer greater precision over graphical methods, especially when using tools for calculation like Excel.

Step-by-step explanation:

Choosing the most accurate forecasting technique depends on the context and the specific dataset. Among simple moving average, weighted moving average, exponential smoothing, and linear regression analysis, no single method is universally 'most accurate.' For example, a simple moving average is easy to understand and works well for datasets without trends or seasonality. A weighted moving average assigns more weight to recent data, making it more responsive to recent changes. Exponential smoothing is similar but uses a smoothing constant to control the weight of past observations. Finally, linear regression analysis fits a line through the data, considering the relationship between two variables and is excellent for data with a linear trend.

Using an analytical technique such as regression analysis can often provide a more accurate forecast than graphical methods because it uses mathematical equations to minimize the error in prediction. This technique would be especially useful for an economist predicting stock market outcomes, as it would consider the linear relationship between past and predicted data points and can be ecologically realistic.

Furthermore, using tools like Excel to graph least-squares regression lines offers a combination of visual analysis and the precision of mathematical calculation to improve forecast accuracy.

Answer 2

Exponential Smoothing.

Step-by-step explanation:

This is said to be so because, in exponential smoothing, the recent past is often the best indicator for future performance.

According to research and analytical studies, the reality of exponential smoothing is far less dramatic and far less traumatic. The truth is, exponential smoothing is a very simple calculation that accomplishes a rather simple task. It just has a complicated name because what technically happens as a result of this simple calculation is actually a little complicated.

It is also noted that understand it helps to start with the general concept of “smoothing” and a couple of other common methods used to achieve smoothing.