Robust Forecasting with Exponential and Holt-Winters Smoothing

22 Pages Posted: 1 Feb 2008

See all articles by Sarah Gelper

Sarah Gelper

KU Leuven - Faculty of Business and Economics (FEB)

Roland Fried

University of Dortmund

Christophe Croux

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES); Catholic University of Leuven (KUL) - Department of Applied Economics

Date Written: June 2007

Abstract

Robust versions of the exponential and Holt-Winters smoothing method for forecasting are presented. They are suitable for forecasting univariate time series in presence of outliers. The robust exponential and Holt-Winters smoothing methods are presented as a recursive updating scheme. Both the update equation and the selection of the smoothing parameters are robustied. This robust method is equivalent to a particular form of the robust Kalman lter in a local linear trend model. A simulation study compares the robust and classical forecasts. The presented method is found to have good forecast performance for time series with and without outliers, as well as for fat tailed time series. The method is illustrated using real data incorporating trends and seasonal effects.

Keywords: Forecasting, Holt-Winters smoothing, Robust methods, Time series, Smoothing, Time, Outliers, Methods, Selection, Parameters, Model, Simulation, Studies, Performance, Data, Trends

Suggested Citation

Gelper, Sarah and Fried, Roland and Croux, Christophe, Robust Forecasting with Exponential and Holt-Winters Smoothing (June 2007). Available at SSRN: https://ssrn.com/abstract=1089403 or http://dx.doi.org/10.2139/ssrn.1089403

Sarah Gelper (Contact Author)

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Roland Fried

University of Dortmund ( email )

D-44221 Dortmund
Germany

Christophe Croux

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium

Catholic University of Leuven (KUL) - Department of Applied Economics ( email )

Leuven, B-3000
Belgium

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