Formula
Examples
1) 3 year Exponential Moving Average | year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 |
| Sales | 5.2 | 4.9 | 5.5 | 4.9 | 5.2 | 5.7 | 5.4 | 5.8 | 5.9 | 6 | 5.2 | 4.8 |
Calculate 3 year Exponential Moving Average
Solution:
`alpha=2/(n+1)=2/(3+1)=0.5`
(1)
year | (2)
Sales | (3)
Exponential Smoothing
`(alpha=0.5)` |
| 1 | 5.2 | 5.2 |
| 2 | 4.9 | `0.5*5.2+0.5*5.2=5.2` |
| 3 | 5.5 | `0.5*4.9+0.5*5.2=5.05` |
| 4 | 4.9 | `0.5*5.5+0.5*5.05=5.275` |
| 5 | 5.2 | `0.5*4.9+0.5*5.275=5.0875` |
| 6 | 5.7 | `0.5*5.2+0.5*5.0875=5.1438` |
| 7 | 5.4 | `0.5*5.7+0.5*5.1438=5.4219` |
| 8 | 5.8 | `0.5*5.4+0.5*5.4219=5.4109` |
| 9 | 5.9 | `0.5*5.8+0.5*5.4109=5.6055` |
| 10 | 6 | `0.5*5.9+0.5*5.6055=5.7527` |
| 11 | 5.2 | `0.5*6+0.5*5.7527=5.8764` |
| 12 | 4.8 | `0.5*5.2+0.5*5.8764=5.5382` |
| 13 | | `0.5*4.8+0.5*5.5382=5.1691` |
2) 3 year Exponential Moving Average | year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
| Sales | 30 | 25 | 35 | 25 | 20 | 30 | 35 | 40 | 30 | 45 |
Calculate 3 year Exponential Moving Average
Solution:
`alpha=2/(n+1)=2/(3+1)=0.5`
(1)
year | (2)
Sales | (3)
Exponential Smoothing
`(alpha=0.5)` |
| 1 | 30 | 30 |
| 2 | 25 | `0.5*30+0.5*30=30` |
| 3 | 35 | `0.5*25+0.5*30=27.5` |
| 4 | 25 | `0.5*35+0.5*27.5=31.25` |
| 5 | 20 | `0.5*25+0.5*31.25=28.125` |
| 6 | 30 | `0.5*20+0.5*28.125=24.0625` |
| 7 | 35 | `0.5*30+0.5*24.0625=27.0312` |
| 8 | 40 | `0.5*35+0.5*27.0312=31.0156` |
| 9 | 30 | `0.5*40+0.5*31.0156=35.5078` |
| 10 | 45 | `0.5*30+0.5*35.5078=32.7539` |
| 11 | | `0.5*45+0.5*32.7539=38.877` |
This material is intended as a summary. Use your textbook for detail explanation.
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