Developing two 4-parameter and 5-parameter exponential smoothing methods with multiplicative trend for demand forecasting

Subject Areas : Forecasting

Sobhan Davarpanah ¹ , Reza Yousefi Zenouz ² , Amir-Reza Abtahi ³

1 - Operations Management and Information Technology, Kharazmi University
2 - Operations Management and Information Technology, Kharazmi University
3 - Department of Operations Management and Information Technology, Kharazmi University, Tehran, Iran

Received: 2021-02-04 Accepted : 2021-12-30 Published : 2021-08-01

Keywords: Holt-Winters methods, Damped trend methods, Multiplicative Trend, M3-Competition, Symmetric relative efficiency measure,

Abstract :

Exponential smoothing methods, especially Holt-Winters family, have been extensively utilized to demand time series forecasting. Previous studies show that Extended Holt Winters methods, by adding a smoothing constant to the level equation of Holt Winters methods, can improve the forecasting performance significantly. The improvements gained by the Extended Holt Winters method with additive trend motivated this research to extend this idea to the Holt Winters method with multiplicative trends too.In this paper, adding a smoothing constant to the Holt-Winters with multiplicative trend and also Holt-Winters with damped multiplicative trend was investigated, and the performance of these methods was compared with the classical methods. Quarterly and monthly time series of M3-Competition with the minimum length of ten years were used to measure the performance of proposed methods.The results showed that EHW and XHW proposed in this paper, significantly outperformed the classical Holt Winters multiplicative trend methods and can be considered by forecasters due to their better smoothing and forecasting performances.

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