Resolve Problem with α = .1 and β = .8. Using MSE, determine which smoothing constants provide a better forecast.
Problem - Income at the architectural firm Spraggins and Yunes for the period February to July was as follows:
|
MONTH
|
FEBUARY
|
MARCH
|
APRIL
|
MAY
|
JUNE
|
JULY
|
|
Income (in $ thousand)
|
70.0
|
68.5
|
64.8
|
71.7
|
71.3
|
72.8
|
Use trend-adjusted exponential smoothing to forecast the firm's August income. Assume that the initial forecast average for February is $65,000 and the initial trend adjustment is 0. The smoothing constants selected are α = .1 and β = .2.