Forums > General > merging forecasts for varied time horizons?

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 Strange Total Posts: 1561 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). “My dear, here we must run as fast as we can, just to stay in place. And if you wish to go anywhere you must run twice as fast as that.”
 tabris Total Posts: 1262 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: 468 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: 749 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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