R: Trimmed Bias-Corrected Eigenvector Forecast Combination

comb_EIG4 {ForecastComb}

R Documentation

Trimmed Bias-Corrected Eigenvector Forecast Combination

Description

Computes forecast combination weights according to the trimmed bias-corrected eigenvector approach by Hsiao and Wan (2014) and produces forecasts for the test set, if provided.

Usage

comb_EIG4(x, ntop_pred = NULL, criterion = "RMSE")

Arguments

`x`	An object of class `foreccomb`. Contains training set (actual values + matrix of model forecasts) and optionally a test set.
`ntop_pred`	Specifies the number of retained predictors. If `NULL` (default), the inbuilt optimization algorithm selects this number.
`criterion`	If `ntop_pred` is not specified, a selection criterion is required for the optimization algorithm: one of "MAE", "MAPE", or "RMSE". If `ntop_pred` is selected by the user, `criterion` should be set to `NULL` (default).

Details

The underlying methodology of the trimmed bias-corrected eigenvector approach by Hsiao and Wan (2014) is the same as their bias-corrected eigenvector approach. The only difference is that the bias-corrected trimmed eigenvector approach pre-selects the models that serve as input for the forecast combination, only a subset of the available forecast models is retained, while the models with the worst performance are discarded.

The number of retained forecast models is controlled via ntop_pred. The user can choose whether to select this number, or leave the selection to the inbuilt optimization algorithm (in that case ntop_pred = NULL). If the optimization algorithm should select the best number of retained models, the user must select the optimization criterion: MAE, MAPE, or RMSE. After this trimming step, the weights, the intercept and the combined forecast are computed in the same way as in the bias-corrected eigenvector approach.

The bias-corrected trimmed eigenvector approach combines the strengths of the
bias-corrected eigenvector approach and the trimmed eigenvector approach.

Value

Returns an object of class foreccomb_res with the following components:

`Method`	Returns the used forecast combination method.
`Models`	Returns the individual input models that were used for the forecast combinations.
`Intercept`	Returns the intercept (bias correction).
`Weights`	Returns the combination weights obtained by applying the combination method to the training set.
`Top_Predictors`	Number of retained predictors.
`Ranking`	Ranking of the predictors that determines which models are removed in the trimming step.
`Fitted`	Returns the fitted values of the combination method for the training set.
`Accuracy_Train`	Returns range of summary measures of the forecast accuracy for the training set.
`Forecasts_Test`	Returns forecasts produced by the combination method for the test set. Only returned if input included a forecast matrix for the test set.
`Accuracy_Test`	Returns range of summary measures of the forecast accuracy for the test set. Only returned if input included a forecast matrix and a vector of actual values for the test set.
`Input_Data`	Returns the data forwarded to the method.

Author(s)

Christoph E. Weiss and Gernot R. Roetzer

References

Hsiao, C., and Wan, S. K. (2014). Is There An Optimal Forecast Combination? Journal of Econometrics, 178(2), 294–309.

Examples

obs <- rnorm(100)
preds <- matrix(rnorm(1000, 1), 100, 10)
train_o<-obs[1:80]
train_p<-preds[1:80,]
test_o<-obs[81:100]
test_p<-preds[81:100,]

## Number of retained models selected by the user:
data<-foreccomb(train_o, train_p, test_o, test_p)
comb_EIG4(data, ntop_pred = 2, criterion = NULL)

## Number of retained models selected by algorithm:
data<-foreccomb(train_o, train_p, test_o, test_p)
comb_EIG4(data, ntop_pred = NULL, criterion = "RMSE")

[Package ForecastComb version 1.3.1 Index]