Engineering Alpha

Engineering Alpha

Unlocking Time Series Insights with the Theta Method

A Simplified Approach to Time Series Decomposition and Prediction

Sofien Kaabar, CFA's avatar
Sofien Kaabar, CFA
Jun 27, 2025
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One method for predicting future values of a time series is the Theta method. It integrates two fundamental concepts: breaking down the time series and utilizing basic forecasting techniques to estimate future values.

This article sheds some light about its intuition and shows how to create an algorithm in Python based on the Theta method.

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