Asymmetric prediction intervals using half moment of distribution

Transcription

1 Asymmetric prediction intervals using half moment of distribution Presentation at ISIR 2016, Budapest 23 rd August 2016 Lancaster Centre for Forecasting Asymmetric prediction intervals using half moment of distribution 1 / 21

2 Motivation Defining safety stock level is important in inventory control. The safety stock calculation is connected to the calculation of Prediction Intervals (PI): one vs. two-sided α; cumulative vs. per-period. Typically we assume symmetric error distributions often inappropriate. Develop (relatively) simple ways to produce assymetric PIs. Asymmetric prediction intervals using half moment of distribution 2 / 21

3 How are PIs typically constructed? We calculate PIs as: µ t+h t z α/2 σ t+h t < y t+h < µ t+h t + z 1 α/2 σ t+h t, (1) µ t+h t is the conditional mean, σ t+h t is the conditional variance, z1 α/2 is the z-statistic value for probability α. Assuming normality z 1 α/2 = Φ 1 (1 α/2) Eq. (1) is also a good approximation for cases of not normal, but symmetric distributions. Asymmetric prediction intervals using half moment of distribution 3 / 21

4 What should we do when the distribution is not symmetric? We want to use information about asymmetry, in a relatively simple way easy to transfer to practice. Idea: use different estimation of lower and upper variance differently use different statistics standard deviation makes sense when the distribution is symmetric and Ȳ describes well the central tendency of the error distribution. We introduce a statistic that does both, the half moment. Asymmetric prediction intervals using half moment of distribution 4 / 21

5 Half moment and its properties Half moment measures density of distribution on left and right sides from some constant C, which is a measure of central tendency: T HM = yt C, t=1 yt is variable of interest. HM is in general a complex number: HM = R(HM) + ii(hm). i is imaginary unit that satisfies: i 2 = 1. Asymmetric prediction intervals using half moment of distribution 5 / 21

6 HM is robust to extreme values Asymmetric prediction intervals using half moment of distribution 6 / 21

7 Real part R(HM) determines density of right-hand side (from C) of distribution that would be errors above the centre. Imaginary part I(HM) shows density of left-hand side of distribution that would be errors below the centre. The higher values of R(HM) or I(HM) are, the longer corresponding tail of distribution is. Note that R(HM) and I(HM) do not have to be equal. If the size of the real and imaginary parts is the focus then the Half Absolute Momement (HAM) is connected to HM: T HAM = yt C = R(HM) + I(HM). t=1 Asymmetric prediction intervals using half moment of distribution 7 / 21

8 HM for standard normal distribution is: HM N = (1 + i)γ(0.75)π (1 + i)0.411, Γ( ) is Gamma function. Bounds can be constructed using this information: { µt+h t + z α/2 I(HM t+h t ) 2 /I(HM N ) 2 µ t+h t + z 1 α/2 R(HM t+h t ) 2 /R(HM N ) 2, so I(HM) 2 /I(HM N ) 2 is estimate of σ l for left-hand side, while R(HM) 2 /R(HM N ) 2 is estimate of σ r for right-hand side. Asymmetric prediction intervals using half moment of distribution 8 / 21

9 For standard deviation C is Ȳ The question is how to estimate C for HM (or HAM). This can be: Mean of yt assumes symmetry; Median of yt robust to extremes, but still enjoys symmetry; Mode of y t does not assume symmetry, but needs to be estimated; Optimal value based on minimum of HAM: C = argmin c IR yt c Asymmetric prediction intervals using half moment of distribution 9 / 21

10 A standard deviation based alternative Another way of constructing asymmetric PI estimate σ l and σ r separately: σ l = 1 T l y t<µ (y t µ) 2 σ r = 1 T r y t>µ (y t µ) 2, Tl is number of observations to the left of µ; Tr is number of observation to the right of µ. Update the calculation of PIs: µ t+h t + z α/2 σ l,t+h t < y t+h < µ t+h t + z 1 α/2 σ r,t+h t. (2) Asymmetric prediction intervals using half moment of distribution 10 / 21

11 Simulations In order to compare all the methods, we do simulations control distributions samples from Normal and Log-normal distributions with sizes: 50, 100, 500, 1000, We expect to see the proposed methods to make a difference for the Log-normal case. Asymmetric prediction intervals using half moment of distribution 11 / 21

12 Several PI construction methods: Standard (Sd) benchmark; Two standard deviations, method (2) (Sd.dual); HM with C = ȳ (Mean); HM with C = Md(y) (Median); HM with C = Mo(y) (Mode); HM with optimised C (Opt); Typical metric of performance is coverage. We do not use it as it is one-sided (does not evaluate how much more you cover!) Instead we will use the absolute distance of the PIs from the empirical realised quantiles penalises both under- and over-coverage. Asymmetric prediction intervals using half moment of distribution 12 / 21

13 Results Asymmetric prediction intervals using half moment of distribution 13 / 21

14 Nemenyi post-hoc test for significant differences Of course one should keep in mind that we can increase the number of distributions until we get significance! Asymmetric prediction intervals using half moment of distribution 14 / 21

15 Normal distribution Sd Sd.dual Mean Median Mode Opt Mean Table: Overall distances for different methods. Normal distribution Asymmetric prediction intervals using half moment of distribution 15 / 21

16 Log-normal distribution Sd Sd.dual Mean Median Mode Opt Mean Table: Overall distances for different methods. Log-normal distribution Asymmetric prediction intervals using half moment of distribution 16 / 21

17 Real data experiment Use 12 heavily promoted time series n = 103 weeks, use 52 as test set. Perform rolling origin evaluation. Evaluate PI distance for one-step ahead predictions. Non-seasonal exponential smoothing (allow for any trend or none) with MAE as cost function heavily promoted. Asymmetric prediction intervals using half moment of distribution 17 / 21

18 Sales Time Asymmetric prediction intervals using half moment of distribution 18 / 21

19 Results Dist.Lower Dist.Upper Dist.Total Sd Sd.dual Mean Median Mode Opt Table: Overall distances for different methods. Asymmetric prediction intervals using half moment of distribution 19 / 21

20 Conclusions HM produces robust asymmetric intervals; is robustness desirable?... case of baseline + judgemental adjustments... shocks in the supply chain OK for symmetric distributions; It performs well error distribution is asymmetric; Left/right standard deviations is an interesting alternative. Asymmetric prediction intervals using half moment of distribution 20 / 21

21 Thank you for your attention! Nikolaos Kourentzes Lancaster Centre for Forecasting