Essays in Hierarchical Time Series Forecasting and Forecast Combination
Creators: name: Weiss, Christoph
Publisher: name: Apollo - University of Cambridge Repository
Year: 2018
Subjects: Time Series Analysis
Hierarchical Forecasting
Aggregation
Volatility Modelling
Forecast Combination
Dynamic Model Selection
Inflation Forecasting
R
Healthcare Forecasting

description: This dissertation comprises of three original contributions to empirical forecasting research. Chapter 1 introduces the dissertation. Chapter 2 contributes to the literature on hierarchical time series (HTS) modelling by proposing a disaggregated forecasting system for both inflation rate and its volatility. Using monthly data that underlies the Retail Prices Index for the UK, we analyse the dynamics of the inflation process. We examine patterns in the time-varying covariation among product-level inflation rates that aggregate up to industry-level inflation rates that in turn aggregate up to the overall inflation rate. The aggregate inflation volatility closely tracks the time path of this covariation, which is seen to be driven primarily by the variances of common shocks shared by all products, and by the covariances between idiosyncratic product-level shocks. We formulate a forecasting system that comprises of models for mean inflation rate and its variance, and exploit the index structure of the aggregate inflation rate using the HTS framework. Using a dynamic model selection approach to forecasting, we obtain forecasts that are between 9 and 155 % more accurate than a SARIMA-GARCH(1,1) for the aggregate inflation volatility. Chapter 3 is on improving forecasts using forecast combinations. The paper documents the software implementation of the open source R package for forecast combination that we coded and published on the official R package depository, CRAN. The GeomComb package is the only R package that covers a wide range of different popular forecast combination methods. We implement techniques from 3 broad categories: (a) simple non-parametric methods, (b) regression-based methods, and (c) geometric (eigenvector) methods, allowing for static or dynamic estimation of each approach. Using S3 classes/methods in R, the package provides a user-friendly environment for applied forecasting, implementing solutions for typical issues related to forecast combination (multicollinearity, missing values, etc.), criterion-based optimisation for several parametric methods, and post-fit functions to rationalise and visualise estimation results. The package has been listed in the official R Task Views for Time Series Analysis and for Official Statistics. The brief empirical application in the paper illustrates the package’s functionality by estimating forecast combination techniques for monthly UK electricity supply. Chapter 4 introduces HTS forecasting and forecast combination to a healthcare staffing context. A slowdown of healthcare budget growth in the UK that does not keep pace with growth of demand for hospital services made efficient cost planning increasingly crucial for hospitals, in particular for staff which accounts for more than half of hospitals’ expenses. This is facilitated by accurate forecasts of patient census and churn. Using a dataset of more than 3 million observations from a large UK hospital, we show how HTS forecasting can improve forecast accuracy by using information at different levels of the hospital hierarchy (aggregate, emergency/electives, divisions, specialties), compared to the naïve benchmark: the seasonal random walk model applied to the aggregate. We show that forecast combination can improve accuracy even more in some cases, and leads to lower forecast error variance (decreasing forecasting risk). We propose a comprehensive parametric approach to use forecasts in a nurse staffing model that has the aim of minimising cost while satisfying that the care requirements (e.g. nurse hours per patient day thresholds) are met
description: My research was supported through grants by ESRC, Cambridge Trusts, the Qualcomm Trust, and St. John's College.