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    Question

    Which of the following methods is most appropriate for

    forecasting future values in time series data with a consistent trend and seasonality?
    A Moving averages Correct Answer Incorrect Answer
    B ARIMA Correct Answer Incorrect Answer
    C Exponential smoothing Correct Answer Incorrect Answer
    D Random Forest Correct Answer Incorrect Answer
    E Linear regression Correct Answer Incorrect Answer

    Solution

    Exponential smoothing is one of the most effective forecasting methods when dealing with time series data that exhibits both trend and seasonality. It assigns exponentially decreasing weights to past observations, which means that more recent data points have a greater influence on the forecast. The method adapts well to data with trends and seasonal variations because it accounts for these patterns in its calculation. Variants such as Holt-Winters exponential smoothing are used specifically when the data shows seasonality and trend components, making it suitable for time series forecasting where such features are evident. Why Other Options Are Incorrect: • A: Moving averages are useful for smoothing time series data but do not explicitly handle trends and seasonality as well as exponential smoothing. • B: ARIMA (AutoRegressive Integrated Moving Average) is a powerful method but is more complex and suitable for non-seasonal data or when seasonality is handled separately through seasonal ARIMA (SARIMA). • D: Random Forest is a machine learning model and is not typically used for forecasting time series data that shows clear seasonality and trend. • E: Linear regression is more suitable for predicting values based on independent variables, not for time series forecasting where autocorrelation and seasonality are crucial.

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