User Manual

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 α and the less sensitive the
average becomes to fluctuations in current values.
Forecasting with exponential smoothing involves selecting the best smoothing
factor based on historical data and then using the factor for updating subsequent
data and forecasting. This procedure uses the following HP 12C program:
KEYSTROKES DISPLAY
CLEAR
00-
01- 36
02- 36
6
03- 45 6
04- 30
05- 36
06- 20
4
07-44 40 4
08- 43 36
09- 31
10- 33
11- 33
0
12- 45 0
13- 20