A simple moving average gives more weight to recent periods than older periods.

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BlackTom AI · Accepted Answer

The statement under consideration is: 'A simple moving average gives more weight to recent periods than older periods.'
Option 1: True. This claim is not accurate for a simple moving average. In an SMA, all observations within the defined window are weighted equally, so each period contributes the same amount to the average regardless of its position in time. There is no built-in emphasis on more recent data, which contradicts the idea that recent periods are weighted more.
Option 2: False. This option correctly states the characteristic of a simple moving average. An SMA uses equal weights for all observations within the window, meaning every data point in the window has the same influence on the calculated average. If more weight to recent periods were desired, a different method such as an exponential moving average (which assigns exponentially decreasing weights to older data) would be used instead of SMA.
A helpful way to remember: in SMA, weights are uniform across the window; in contrast, weighted schemes (like EMA) intentionally bias toward newer observations. This distinction is the key to understanding why the original statement is incorrect.

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A simple moving average gives more weight to recent periods than older periods.

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