Introduction to ETS
Ivan Svetunkov · 2023
This chapter focuses on the main ideas behind the conventional ETS, as formulated by Hyndman et al., and the connection between Exponential Smoothing and ETS. The reader interested in the history of Exponential Smoothing, how it was developed, and what papers contributed to the field can refer to the reviews of Gardner and Gardner. The components in the ETS taxonomy have clear interpretations: level shows average value per time period, trend reflects the change in the value, while seasonality corresponds to periodic fluctuations. Taking a step back, in this chapter, the authors discuss one of the basic ETS models, the local level model, and the Exponential Smoothing method related to it. One of the main advantages of the ETS model is its state space form, which gives it the flexibility. While many practitioners and academics accept that the smoothing parameters of Exponential Smoothing methods should lie between zero and one, this is not entirely true for the ETS models.