Robust forecasting with exponential and holt-winters smoothing. preprint

Abstract: Robust versions of the exponential and Holt-Winters smoothing method for forecasting are presented. They are suitable for forecasting univariate time series in the presence of outliers. The robust exponential and Holt-Winters smoothing methods are presented as recursive updating schemes that apply the standard technique to pre-cleaned data. Both the update equation and the selection of the smoothing parameters are ro-bustified. A simulation study compares the robust and classical forecasts. The presented method is found to have good forecast performance for time series with and without out-liers, as well as for fat tailed time series and under model misspecification. The method is illustrated using real data incorporating a trend and seasonal effects