Unmasking the Theta Method

Rob Hyndman and B. Billah

No 5/01, Monash Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: The Theta method of forecasting performed particularly well in the M3-competition and is therefore of interest to forecast practitioners. The description of the method given by Assimakopoulos and Nikolopoulos (2000) involves several pages of algebraic manipulation and is difficult to comprehend. We show that the method can be expressed much more simply; furthermore we show that the forecasts obtained are equivalent to simple exponential smoothing with drift.

Keywords: exponential smoothing; forecasting competitions; state space models (search for similar items in EconPapers)
JEL-codes: C50 C53 (search for similar items in EconPapers)
Pages: 6 pages
Date: 2001-06
New Economics Papers: this item is included in nep-ecm and nep-ets
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Citations: View citations in EconPapers (5)

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Journal Article: Unmasking the Theta method (2003)
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