Invertibility Conditions for Exponential Smoothing Models
In this article we discuss invertibility conditions for some state space models, including the models that underly simple exponential smoothing, Holt's linear method, Holt-Winters' additive method and damped trend versions of Holt's and Holt-Winters' methods. The parameter space for which the model is invertible is compared to the usual parameter regions. We find that the usual parameter restrictions (requiring all smoothing parameters to lie between 0 and 1) do not always lead to invertible models. Conversely, some invertible models have parameters which lie outside the usual region. We also find that all seasonal exponential smoothing methods are non-invertible when the usual equations are used. However, this does not affect the forecast mean. Alternative models are presented which solve the problem while retaining the basic exponential smoothing ideas.
|Date of creation:||Apr 2003|
|Date of revision:|
|Contact details of provider:|| Postal: PO Box 11E, Monash University, Victoria 3800, Australia|
Phone: +61 3 99052489
Fax: +61 3 99055474
Web page: http://business.monash.edu/econometrics-and-business-statistics
More information through EDIRC
|Order Information:|| Web: http://business.monash.edu/econometrics-and-business-statistics Email: |
When requesting a correction, please mention this item's handle: RePEc:msh:ebswps:2003-3. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dr Xibin Zhang)
If references are entirely missing, you can add them using this form.