Exponential smoothing

Posted in Operations and Supply Chain Terms, Total Reads: 2623
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Definition: Exponential smoothing

It is a technique which is used to smooth out the data recorded over a period of time and it can also be used to predict the expected future values. It is applicable for data which can be random or occurring at some fixed intervals. It is called exponential smoothing as it assigns the weights for smoothing process in the exponential decreasing format.

It is commonly used in smoothing the financial data over a period of time and to smooth the economic fluctuation of the market.

curve

The formula for it is


formula

Sdenotes the exponential smoothing algorithm

here α is the smoothing factor, and 0 < α < 1.


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