Enter the actual value, forecast value, and previous smoothed value into the calculator to determine the smoothing constant (α). This calculator helps in analyzing time series data for exponential smoothing.
Smoothing Constant Formula
The following formula is used to calculate the smoothing constant (α):
α = (A - F) / (A - P)
Variables:
- α is the smoothing constant
- A is the actual value
- F is the forecast value
- P is the previous smoothed value
To calculate the smoothing constant, subtract the forecast value from the actual value and divide the result by the difference between the actual value and the previous smoothed value.
What is a Smoothing Constant?
The smoothing constant (α) is a parameter used in exponential smoothing models for time series analysis. It determines the weight given to the most recent observation in forecasting future values. A higher smoothing constant places more emphasis on recent data, while a lower smoothing constant gives more weight to historical data. It is a crucial factor in adjusting the level of smoothing applied to the time series data.
How to Calculate a Smoothing Constant?
The following steps outline how to calculate the Smoothing Constant (α).
- First, determine the actual value (A).
- Next, determine the forecast value (F).
- Then, determine the previous smoothed value (P).
- Use the formula α = (A - F) / (A - P) to calculate the smoothing constant.
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem :
Use the following variables as an example problem to test your knowledge.
Actual value (A) = 120
Forecast value (F) = 115
Previous smoothed value (P) = 110
