Stochastic models underlying Croston's method for intermittent demand forecasting

Rob Hyndman () and Lydia Shenstone
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Lydia Shenstone: Monash University, Australia, Postal: Monash University, Australia

Journal of Forecasting, 2005, vol. 24, issue 6, pages 389-402

Abstract: Croston's method is widely used to predict inventory demand when it is intermittent. However, it is an ad hoc method with no properly formulated underlying stochastic model. In this paper, we explore possible models underlying Croston's method and three related methods, and we show that any underlying model will be inconsistent with the properties of intermittent demand data. However, we find that the point forecasts and prediction intervals based on such underlying models may still be useful. Copyright © 2005 John Wiley & Sons, Ltd.

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Related works:
Working Paper: Stochastic models underlying Croston's method for intermittent demand forecasting (2003)
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