Consider the following single exponential smoothing model:
$S_t = aX_t + (1 - a)S_{t-1}$
You are given the following data:
$\hat{a} = 0.1$, $X_t = 0.5$, $S_{t-1} = 0.2$
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)
0.2
0.23
0.5
There is insufficient information given in the question to form more than a one-step- ahead forecast