Solved – Confidence intervals for exponential smoothing

Question

I'm using exponential smoothing (Brown's method) for forecasting. The forecast can be calculated for one or more steps (time intervals). Is there any way to calculate confidence intervals for such prognosis (ex-ante)?

Answer 1

Exponential smoothing methods as such have no underlying statistical model, so prediction intervals cannot be calculated. However, when we do want to add a statistical model, we naturally arrive at state space models, which are generalizations of exponential smoothing - and which allow calculating prediction intervals. See section 7.7 in this free online textbook using R, or look into Forecasting with Exponential Smoothing: The State Space Approach. Both books are by Rob Hyndman and (different) colleagues, and both are very good.