Forums > General > merging forecasts for varied time horizons?

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 Strange Total Posts: 1540 Joined: Jun 2004
 Posted: 2019-05-12 19:09 Here is a problem and, as usual, I am being stupid. I am trying to predict an overnight interest rate in one of the emerging markets in several days (up to 5 weeks). There is a relatively large history of observations (say 5-6 thousand observations) and I found a few predictive models. Model 1: reversion to the long-term mean - produces a forecast for time now + n Model 2: short-term micro-reversion- produces forecast for tomorrow (now + 1)Model 3: day of week seasonality - produces adjustment based on the day of the weekWhat I am trying to do now is merge these models into a single forecasting method. The problem is that (a) the models are not strictly independent and (b) I want to understand if I am getting an improvement (the base line is unchanged from todays rate). I don't interest myself in 'why?'. I think more often in terms of 'when?'...sometimes 'where?'. And always how much?'
 tabris Total Posts: 1260 Joined: Feb 2005
 Posted: 2019-05-13 11:43 wouldn't you just use some form of ensemble learning to combine the forecast? Dilbert: Why does it seem as though I am the only honest guy on earth? Dogbert: Your type tends not to reproduce.
 ronin Total Posts: 446 Joined: May 2006
 Posted: 2019-05-13 12:14 d Prediction = ShortTimeScale * (ShortTerm - Prediction) dt + dSeasonality + dWd ShortTerm = LongTimeScale * (LongTerm - ShortTerm) dt + dZ? "There is a SIX am?" -- Arthur
 nikol Total Posts: 679 Joined: Jun 2005
 Posted: 2019-05-13 14:41 Minimize Sum of error normalized by combined error prediction ~ R2.pred_i (i=1,2) depends on model parameters.R21 ~ abs(pred1-price)/err1R22 ~ abs(pred2-price)/err2combined R2 ~ [(pred1-price)^2+(pred2-price)^2]/[err1^2+err2^2]R2 behaves well, i.e. it roughly follows Chi2.You also can apply inverse-CDF transformations (it's also called PIT) and combine probabilities (using ML/NN?). Usually I check something like:if 2*p-1 \in [-1,1]then (p1+p2-1) \in [-1,1]or something like...PS. typos..
 Zoho Total Posts: 22 Joined: Feb 2018
 Posted: 2019-05-13 16:09 Could Fernholz with his hedged strategy from "Statistics of statistical arbitrage" be of any help?
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