I am using the forecast package in R. I wanted to know how the ets() function finds the value of $alpha$, $beta$ and $gamma$?
Is it by minimizing the SSE or some other criteria?
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Best Answer
The default is MLE. The argument opt.crit controls the optimization criterion. from the help file:
opt.crit
Optimization criterion. One of "mse" (Mean Square Error), "amse" (Average MSE over first nmse forecast horizons), "sigma" (Standard deviation of residuals), "mae" (Mean of absolute residuals), or "lik" (Log-likelihood, the default).