Models with Second Order Exponential Smoothing
Second-orderexponential smoothing is used in forecast strategies 22 and 23. It is based on a linear trend and consists of two equations. The first equation corresponds to that of first-order exponential smoothing except for the bracketed indices. In the second equation, the values calculated in the first equation are used as initial values and are smoothed again.
Formulas for Second-Order Exponential Smoothing
For more information on strategy 23, seeAutomatic Adaptation of the Alpha Factor.
If, over several periods, a time series shows a change in the average value such that a trend pattern is revealed, first-order exponential smoothing produces forecast values that lag behind the actual values by one or several periods. You can achieve a more efficient adjustment of the forecast to the actual values pattern by using second-order exponential smoothing.