Quantitative Analysis for Management, 13/e

5.5 Forecasting Models—Trend and Random Variations

If there is trend present in a time series, the forecasting model must account for this and cannot simply average past values. Two very common techniques will be presented here. The first is exponential smoothing with trend, and the second is called trend projection or simply a trend line.

Exponential Smoothing with Trend

Two smoothing constants are used.

An extension of the exponential smoothing model that will explicitly adjust for trend is called the exponential smoothing with trend model. The idea is to develop an exponential smoothing forecast and then adjust this for trend. Two smoothing constants, $\alpha$ and $\beta ,$ are used in this model, and both of these values must be between 0 and 1. The ...