Journal of the Operational Research Society

, Volume 62, Issue 6, pp 1177–1180

Why the damped trend works

Technical Note

DOI: 10.1057/jors.2010.37

Cite this article as:
Gardner, E. & McKenzie, E. J Oper Res Soc (2011) 62: 1177. doi:10.1057/jors.2010.37

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 

Copyright information

© Operational Research Society 2010

Authors and Affiliations

  1. 1.University of HoustonTexasUSA
  2. 2.University of StrathclydeScotlandUK