Consider the Following Single Exponential Smoothing Model: S_t = $\alpha$ X_t + (1-

question 30

Multiple Choice

Consider the following single exponential smoothing model: S_t = $\alpha$ X_t + (1- $\alpha$ ) S_t-1
You are given the following data:
=0) 1, X_t=0.5,S_t-1=0.2 If we believe that the true DGP can be approximated by the exponential smoothing model, what would be an appropriate 2-step ahead forecast for X? (i.e. a forecast of X_t+2 made at time t)

• A) 0.2
• B) 0.23
• C) 0.5
• D) There is insufficient information given in the question to form more than a one step ahead forecast.