Chapter 7: Forecasting Quantitative Decision Making with Spreadsheet Applications 7 th ed. By Lapin and Whisler Section 7.2.

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Presentation transcript:

Chapter 7: Forecasting Quantitative Decision Making with Spreadsheet Applications 7 th ed. By Lapin and Whisler Section 7.2

Single Parameter Exponential Smoothing

Exponential smoothing: Exponential smoothing: Substitute in F t Substitute in F t Simplify Simplify

Continue the process Continue the process Substitute in F t-1 Substitute in F t-1 Simplify Simplify

Exponential Smoothing: Concept Include all past observations Include all past observations Weight recent observations much more heavily than very old observations: Weight recent observations much more heavily than very old observations: weight today Decreasing weight given to older observations

Forecast Accuracy Є=Y t -F t is the forecast error

Forecasting Performance Measures