Forecasting With Exponential Smoothing - HP 12c Platinum Reference Manual

12c platinum / 12C
RPN Keystrokes
g(013t
:6
:7
10t
12t
100t
5t

Forecasting with Exponential Smoothing

A common method for analyzing trends in sales, inventory and securities is the moving
average. Exponential smoothing is a version of the weighted moving average which is
readily adaptable to programmable calculator forecasting.
Exponential smoothing is often used for short term sales and inventory forecasts. Typical
forecast periods are monthly or quarterly. Unlike a moving average, exponential
smoothing does not require a great deal of historical data. However , it should not be used
with data which has more than a moderate amount of up or down trend.
When using exponential smoothing, a smoothing factor is chosen which affects the
sensitivity of the average much the same way as the length of the standard moving
average period. The correspondence between the two techniques can be represented by
the formula:
where α is the exponential smoothing factor (with values from 0 to 1) and n is the length
of the standard moving average. As the equation shows, the longer the moving average
period, the smaller the equivalent and the less sensitive the average becomes to
fluctuations in current values.
12c platinum
ALG Keystrokes
g(013t
:6
:7
10t
12t
100t
5t
α
Display
a
0.004
b
0.65
c
373.92
Sales in 10th year, (in $K).
349.09
Sales in 12th year, (in $K).
363.36
Maximum annual sales
373.92
(after very long product
life).
Sales in 5th year (actual
202.60
sales were $188K).
2
=
+
n 1
Forecasting
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