Note—Sliding Simulation: A New Approach to Time Series Forecasting

This paper proposes a new approach to time series forecasting based upon three premises: first, a model is selected not by how well it fits historical data but on its ability to accurately predict out-of-sample actual data, and second, models/methods are optimized for each forecasting horizon separately, making it possible to have different models/ methods to predict each of the m horizons.

Abstract

This paper proposes a new approach to time series forecasting based upon three premises. First, a model is selected not by how well it fits historical data but on its ability to accurately predict out-of-sample actual data. Second, a model/method is selected among several run in parallel using out-of-sample information. Third, models/methods are optimized for each forecasting horizon separately, making it possible to have different models/methods to predict each of the m horizons. This approach outperforms the best method of the M-Competition by a large margin when tested empirically with the 111 series subsample of the M-Competition data.