A state space framework for automatic forecasting using exponential smoothing methods

Rob J Hyndman, Anne B Koehler , Ralph D Snyder, Simone Grose
(2002) International Journal of Forecasting 18(3), 439-454


We provide a new approach to automatic busineswwwwws forecasting based on an extended range of exponential smoothing methods. Each method in our taxonomy of exponential smoothing methods can be shown to be equivalent to the forecasts obtained from a state space model. This allows (1) the easy calculation of the likelihood, the AIC and other model selection criteria; (2) the computation of prediction intervals for each method; and (3) random simulation from the underlying state space model. We demonstrate the methods by applying them to the data from the M-competition and the M3-competition.

Keywords: automatic forecasting, exponential smoothing, prediction intervals, state space models.

R code