4.6 Article

Treating and Pruning: New approaches to forecasting model selection and combination using prediction intervals

Journal

INTERNATIONAL JOURNAL OF FORECASTING
Volume 37, Issue 2, Pages 547-568

Publisher

ELSEVIER
DOI: 10.1016/j.ijforecast.2020.07.005

Keywords

Model selection; Forecast combinations; Prediction intervals; Exponential smoothing; Bagging

Funding

  1. Brazilian Coordination for the Improvement of Higher Level Personnel (CAPES) [001]
  2. Brazilian National Council for Scientific and Technological Development (CNPq) [307403/2019-0]
  3. Carlos Chagas Filho Research Support Foundation of the State of Rio de Janeiro (FAPERJ) [202.673/2018, 211.086/2019]

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The study introduces a new method of model selection to enhance the predictive power of automated exponential smoothing routines using prediction intervals, along with a pruning strategy to improve accuracy. Empirical experiments show that these simple methods substantially improve forecasting accuracy.
We propose a new way of selecting among model forms in automated exponential smoothing routines, consequently enhancing their predictive power. The procedure, here addressed as treating, operates by selectively subsetting the ensemble of competing models based on information from their prediction intervals. By the same token, we set forth a pruning strategy to improve the accuracy of both point forecasts and prediction intervals in forecast combination methods. The proposed approaches are respectively applied to automated exponential smoothing routines and Bagging algorithms, to demonstrate their potential. An empirical experiment is conducted on a wide range of series from the M-Competitions. The results attest that the proposed approaches are simple, without requiring much additional computational cost, but capable of substantially improving forecasting accuracy for both point forecasts and prediction intervals, outperforming important benchmarks and recently developed forecast combination methods. (C) 2020 International Institute of Forecasters. Published by Elsevier B.V. All rights reserved.

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