9.2.0. Exponential Weights Moving Average

An exponential weights moving average is an average that weights the observed time series values unequally, with more recent observations being weighted more heavily than older observations. This unequal weighting is achieved through smoothing constants that determine how much weight is given to each observation.

If mt-1 is the moving average calculated for the first t – 1 points in the series xt then, given the value xt, the new moving average is found as:

where:

·       is the smoothing constant ().