Why the damped trend works

E S Gardner, E McKenzie
2011 Journal of the Operational Research Society  
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
more » ... he 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.
doi:10.1057/jors.2010.37 fatcat:4pkd445avzbjdm3oty6kkcv2y4