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    Forecasting MiM Exercises Part3

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    孟启扬
    The document discusses three exercises related to forecasting and predictive analytics. Exercise 1 explores ambiguity in a time series model. Exercise 2 formulates a state space representation of a multivariate process as an ARMA model. Exercise 3 analyzes experts' and laypeople's COVID-19 forecasts and asks questions about the findings.

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    Forecasting MiM Exercises Part3

    Uploaded by

    孟启扬
    6 views2 pages
    The document discusses three exercises related to forecasting and predictive analytics. Exercise 1 explores ambiguity in a time series model. Exercise 2 formulates a state space representation of a multivariate process as an ARMA model. Exercise 3 analyzes experts' and laypeople's COVID-19 forecasts and asks questions about the findings.

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    Forecasting-MiM-exercises-part3

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    The document discusses three exercises related to forecasting and predictive analytics. Exercise 1 explores ambiguity in a time series model. Exercise 2 formulates a state space representation of a multivariate process as an ARMA model. Exercise 3 analyzes experts' and laypeople's COVID-19 forecasts and asks questions about the findings.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    6 views2 pages

    Forecasting MiM Exercises Part3

    Uploaded by

    孟启扬
    The document discusses three exercises related to forecasting and predictive analytics. Exercise 1 explores ambiguity in a time series model. Exercise 2 formulates a state space representation of a multivariate process as an ARMA model. Exercise 3 analyzes experts' and laypeople's COVID-19 forecasts and asks questions about the findings.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 2

    Forecasting and predictive analytics – Exercises – part 3

    Teacher: Pierre Jacob ([email protected])

    Master in Management – ESSEC Business School – 2022

    Each of the first two exercises is worth a quarter of the total grade, while the third exercise is worth half of the
    total grade. Have fun!

    Exercise 3.1. (Ambiguity). We simulate a process as Yt = 0.9Yt−1 +Wt −0.9Wt−1 , where (Wt ) are i.i.d. N (0, 1) and
    Y1 = 2.193, for T = 1, 000 steps. Figure 3.1 shows the series, the autocorrelogram and the partial autocorrelogram
    of the series. Furthermore, when we try to estimate the parameters by running arima(y, order = c(1,0,1)) in
    R, we get:

    C a l l : arima ( x = y , o r d e r = c ( 1 , 0 , 1 ) )
    Coefficients :
    ar1 ma1 intercept
    0.5765 −0.5190 0.0048
    s.e. 0.2046 0.2132 0.0363
    sigma ^2 e s t i m a t e d a s 1 . 0 2 4 : l o g l i k e l i h o o d = −1430.6 , aic = 2869.2

    What is surprising about these results? Propose an explanation.

    Series y Series y
    1.0

    0.02 0.04 0.06


    4

    0.8
    2

    0.6

    Partial ACF
    ACF
    y

    0.4

    −0.02
    0.2
    −2

    0.0

    −0.06

    0 200 400 600 800 1000 0 5 10 15 20 25 30 0 5 10 15 20 25 30

    Time Lag Lag

    Figure 3.1: Traceplot, autocorrelogram and partial autocorrelogram of (Yt ) in Exercise 3.1.

    Exercise 3.2. (State space representation). Consider a four-dimensional process (Xt ). At each time t, the variable
    Xt is a column vector with four entries, denoted by Xt,1 , Xt,2 , Xt,3 , Xt,4 . Consider the state equation relating Xt
    to Xt−1 :    
    η1 1 0
    0 t
       
    η2
     Xt−1 + ξ1 t  ,
    0 1 0  
    Xt = 
    ξ2 t 
    0 0 0 1
      

    0 0 0 0 ξ 3 t

    1
    i.i.d. 
    where η1 , η2 , ξ1 , ξ2 , ξ3 are values in R, and (t ) ∼ N 0, σ 2 . We consider a univariate process (Yt ), which relates
    to (Xt ) through the observation equation  
    Yt = 1 0 0 0 Xt .

    Prove that the above state space model is equivalent to an ARMA(p,q) model for (Yt ), for which you will specify
    p and q, and express the autoregressive and moving average parameters in terms of η1 , η2 , ξ1 , ξ2 , ξ3 .

    Exercise 3.3. (Experts, laypeople and COVID-19). For this exercise, you must first read an article which you can
    find on Moodle or here: https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0250935,
    entitled How well did experts and laypeople forecast the size of the COVID-19 pandemic?, by Gabriel Recchia,
    Alexandra L. J. Freeman and David Spiegelhalter. Answer the following questions (briefly!) based on your under-
    standing of the article.

    1. According to the article, are experts’ predictions more accurate than non-experts’ predictions?

    2. Are the predictions well-calibrated, for experts and for non-experts?

    3. The authors describe how they turn each of the intervals, say (a, b), into a probability distribution. Denote
    by X a random variable following the distribution constructed from the interval (a, b). What is the value of
    the probability P(X ∈ (a, b))?

    4. The authors write that “probability distributions of different individuals were combined with simple averaging
    of the probabilities (i.e. ‘vertical’ combination)” to create the consensus distributions shown in Figures 1.(a)-
    (b)-(c)-(d). Why are there spikes in the consensus distributions, particularly apparent in Figure 1.(a)?

    5. Which of the following statements are true, according to the article?

    • Overconfidence is influenced by the feedback that individuals receive about their predictions.
    • Accountability might help to incentivize good calibration among forecasters.
    • There is evidence that overconfident experts are invited more often to advise policy-makers and to give
    interviews in the media.

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