Exponential smoothing with regressors: Estimation and initialization

摘要

The main objective of this paper is to outline the estimation and initialization procedures for the exponential smoothing with regressors forecasting approach which was recently introduced. The paper also discusses what restrictions need to be imposed during the estimation process so that the algorithm satisfies the forecastability conditions. An empirical study using real non-seasonal data shows that the new approach sometimes has the ability to produce better forecasts than the existing exponential smoothing methods without regressors.