Videos > Exponential Smoothing in Excel 2013
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Exponential Smoothing in Excel 2013: Overview
Exponential smoothing is a way to smooth out data for presentations or to make forecasts. It’s usually used for finance and economics. If you have a time series with a clear pattern, you could use moving averages — but if you don’t have a clear pattern you can use exponential smoothing to forecast. Perhaps one of the most confusing aspects of exponential smoothing is the damping factor. Damping factors are used to smooth out the graph and take on a value between 0 and 1. Technically, the damping factor is 1 minus the alpha level (1 – α). But all you really need to know is smaller alpha levels (i.e. larger damping factors), smooths out the peaks and valleys more than larger alpha levels (smaller damping factors). Smaller damping factors also mean that your smoothed values are closer to the actual data points than larger damping factors. The easiest way to create exponential smoothing in Excel is to use the Data Analysis Toolpak.
Exponential Smoothing in Excel 2013: Steps
Step 1: Click the “Data” tab and then click “Data Analysis.”
Step 2: Click “Exponential Smoothing” and then click “OK.”
Step 3: Click the Input Range box and then type the location for your forecast data. For example, if you typed your data into cells E1 to E10, type “E1:E10” into that box
Step 4: Type a damping factor into the damping factor box. A valid value is 0 to 1. Don’t worry if you aren’t sure what damping factor to type in — you can easily repeat the tests with different damping factors (i.e. 0.9, 0.5, 0.3) to see which one works best.
Step 5: Type a cell location into the Output range box. You generally want this to be in the next column. For example, if you typed your data into cells E1 to E10, type “F1” into that box
Step 6: Click “OK.”
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