Finance Numericals

  Exponential Smoothing Forecast Method: It is a time series used previous data to forecast future data. It is used to forecast short term data. It does not able to forecast future trend with the help of previous data. It is a simple method to forecast future demand with the help of past actual demand data and by using alpha. Formula: F t = α A t-1 + (1- α) F t-1 Where, F t = Forecast demand for week t Α t-1 = previous period actual demand F t-1 = previous period forecast demand And α =Smoothing constant Common Measures of Error Mean Absolute Deviation (MAD): MAD = Ʃ ǀ actual –forecast ǀ / n Mean Squared Error (MSE): MSE = Ʃ (forecast errors) 2 / n Mean Absolute Percentage Error: MAPE = 100* Ʃ ǀ actual i –forecast i ǀ/actual i / n Example: Find out the future demand with the help of using exponential smoothing forecast method. Alpha (α) is 0.2. Time period Actual Demand(At) Forecast demand(Ft) 1