Question: EXPONENTIAL SMOOTHING Now consider the case in which forecasts are generated by exponential smoothing. In this case Ft may be represented by the weighted infinite sum of past values of demand.
This is the standard deviation of the forecast error for simple exponential smoothing in terms of the standard deviation of each observation. The distribution of the forecast error for exponential smoothing is normal for essentially the same reasons as stated above for moving averages. Notice that if we equate the variances of the forecast error for exponential smoothing and moving averages, we obtain
