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Generalizing the Theta method for automatic forecasting
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DOI：10.1016/j.ejor.2020.01.007.png)
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Abstract
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The Theta method became popular due to its superior performance in the M3 forecasting competition. Since then, although it has been shown that Theta provides accurate forecasts for various types of data, being a solid benchmark to beat, limited research has been conducted to exploit its full potential and generalize its reach. This paper examines three extensions on Theta's framework to boost its performance. This includes (i) considering both linear and non-linear trends, (ii) allowing to adjust the slope of such trends, and (iii) introducing a multiplicative expression of the underlying forecasting model along with the existing, additive one. The proposed modifications transform Theta into a generalized forecasting algorithm, suitable for automatic time series predictions. The proposed algorithm is evaluated using the series of the M, M3, and M4 competitions. Such an evaluation shows that the proposed approach produces more accurate forecasts than the original, classic Theta, both in terms of point forecasts and prediction intervals, and is also more accurate than other well-known methods for yearly series. (C) 2020 Elsevier B.V. All rights reserved.
Keywords:
Forecasting
Time series
Theta method
Automatic model selection
M competitions
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