From the course: Business Analytics: Forecasting with Exponential Smoothing
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Initialize the forecasts
From the course: Business Analytics: Forecasting with Exponential Smoothing
Initialize the forecasts
- [Instructor] This worksheet initializes the forecasts in cell C3 using the technique that we have used in chapters one and two of this course to set the first forecast equal to the first actual observation. There's nothing wrong with that technique although other, and sometimes better ways, are available. The basic problem is that each forecast depends on a prior actual observation and a prior forecast. So, the forecast for the first period presents a special problem because there was no prior action observation and there was no prior forecast. The second period presents a related problem. The prior period, period one, has an actual observation but, it does not have an associated forecast. In this case, the forecast for the first period is not available. One way to bootstrap it is to simply set the forecast for the second period equal to the actual observation in the first period. That's an approach that you will frequently see in the literature on exponential smoothing. However, if…
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