Why the damped trend works

E S Gardner () and E McKenzie
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E S Gardner: University of Houston
E McKenzie: University of Strathclyde

Journal of the Operational Research Society, 2011, vol. 62, issue 6, 1177-1180

Abstract: Abstract The damped trend method of exponential smoothing is a benchmark that has been difficult to beat in empirical studies of forecast accuracy. One explanation for this success is the flexibility of the method, which contains a variety of special cases that are automatically selected during the fitting process. That is, when the method is fitted, the optimal parameters usually define a special case rather than the method itself. For example, in the M3-competition time series, the parameters defined the damped trend method only about 43% of the time using local initial values for the method components. In the remaining series, a special case was selected, ranging from a random walk to a deterministic trend. The most common special case was a new method, simple exponential smoothing with a damped drift term.

Keywords: forecasting; time series; exponential smoothing (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (18)

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DOI: 10.1057/jors.2010.37

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