The Holt-Winters Forecasting Procedure

Chris Chatfield

423 citations0/0 files storedJournal of the Royal Statistical Society Series C (Applied Statistics)

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Forecasting Techniques and Applications Time Series Analysis and Forecasting Statistical and numerical algorithms

Abstract

SUMMARY The Holt-Winters forecasting procedure is a simple widely used projection method which can cope with trend and seasonal variation. However, empirical studies have tended to show that the method is not as accurate on average as the more complicated Box-Jenkins procedure. This paper points out that these empirical studies have used the automatic version of the method, whereas a non-automatic version is also possible in which subjective judgement is employed, for example, to choose the correct model for seasonality. The paper re-analyses seven series from the Newbold-Granger study for which Box-Jenkins forecasts were reported to be much superior to the (automatic) Holt-Winters forecasts. The series do not appear to have any common properties, but it is shown that the automatic Holt-Winters forecasts can often be improved by subjective modifications. It is argued that a fairer comparison would be that between Box-Jenkins and a non-automatic version of Holt-Winters. Some general recommendations are made concerning the choice of a univariate forecasting procedure. The paper also makes suggestions regarding the implementation of the Holt-Winters procedure, including a choice of starting values.

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References

1977Time Series Analysis: Forecasting and Control 1960Forecasting Sales by Exponentially Weighted Moving Averages 2000Forecasting Economic Time Series 1974Experience with Forecasting Univariate Time Series and the Combination of Forecasts 1977Forecasting and time series analysis

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