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on Forecasting |
| By: | Souhir Ben Amor; Thomas M\"obius; Felix M\"usgens |
| Abstract: | This paper combines a techno-economic energy system model with an econometric model to maximise electricity price forecasting accuracy. The proposed combination model is tested on the German day-ahead wholesale electricity market. Our paper also benchmarks the results against several econometric alternatives. Lastly, we demonstrate the economic value of improved price estimators maximising the revenue from an electric storage resource. The results demonstrate that our integrated model improves overall forecasting accuracy by 18 %, compared to available literature benchmarks. Furthermore, our robustness checks reveal that a) the Ensemble Deep Neural Network model performs best in our dataset and b) adding output from the techno-economic energy systems model as econometric model input improves the performance of all econometric models. The empirical relevance of the forecast improvement is confirmed by the results of the exemplary storage optimisation, in which the integration of the techno-economic energy system model leads to a revenue increase of up to 10 %. |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2411.04880 |
| By: | Kozyrev, Boris |
| Abstract: | This paper investigates forecast aggregation via the random subspace regressions method (RSM) and explores the potential link between RSM and the Shapley value decomposition (SVD) using the US GDP growth rates. This technique combination enables handling high-dimensional data and reveals the relative importance of each individual forecast. First, it is possible to enhance forecasting performance in certain practical instances by randomly selecting smaller subsets of individual forecasts and obtaining a new set of predictions based on a regression-based weighting scheme. The optimal value of selected individual forecasts is also empirically studied. Then, a connection between RSM and SVD is proposed, enabling the examination of each individual forecast's contribution to the final prediction, even when there is a large number of forecasts. This approach is model-agnostic (can be applied to any set of predictions) and facilitates understanding of how the aggregated prediction is obtained based on individual forecasts, which is crucial for decision-makers. |
| Keywords: | forecast combination, forecast combination puzzle, forecasting, random subset, Shapley value decomposition |
| JEL: | C22 C45 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iwhdps:304455 |
| By: | Abdul Rahman; Neelesh Upadhye |
| Abstract: | In high frequency trading, accurate prediction of Order Flow Imbalance (OFI) is crucial for understanding market dynamics and maintaining liquidity. This paper introduces a hybrid predictive model that combines Vector Auto Regression (VAR) with a simple feedforward neural network (FNN) to forecast OFI and assess trading intensity. The VAR component captures linear dependencies, while residuals are fed into the FNN to model non-linear patterns, enabling a comprehensive approach to OFI prediction. Additionally, the model calculates the intensity on the Buy or Sell side, providing insights into which side holds greater trading pressure. These insights facilitate the development of trading strategies by identifying periods of high buy or sell intensity. Using both synthetic and real trading data from Binance, we demonstrate that the hybrid model offers significant improvements in predictive accuracy and enhances strategic decision-making based on OFI dynamics. Furthermore, we compare the hybrid models performance with standalone FNN and VAR models, showing that the hybrid approach achieves superior forecasting accuracy across both synthetic and real datasets, making it the most effective model for OFI prediction in high frequency trading. |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2411.08382 |
| By: | Shamima Nasrin Tumpa; Kehelwala Dewage Gayan Maduranga |
| Abstract: | This study explores the use of Recurrent Neural Networks (RNN) for real-time cryptocurrency price prediction and optimized trading strategies. Given the high volatility of the cryptocurrency market, traditional forecasting models often fall short. By leveraging RNNs' capability to capture long-term patterns in time-series data, this research aims to improve accuracy in price prediction and develop effective trading strategies. The project follows a structured approach involving data collection, preprocessing, and model refinement, followed by rigorous backtesting for profitability and risk assessment. This work contributes to both the academic and practical fields by providing a robust predictive model and optimized trading strategies that address the challenges of cryptocurrency trading. |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2411.05829 |
| By: | Asef Yelghi; Aref Yelghi; Shirmohammad Tavangari |
| Abstract: | The development of artificial intelligence has made significant contributions to the financial sector. One of the main interests of investors is price predictions. Technical and fundamental analyses, as well as econometric analyses, are conducted for price predictions; recently, the use of AI-based methods has become more prevalent. This study examines daily Dollar/TL exchange rates from January 1, 2020, to October 4, 2024. It has been observed that among artificial intelligence models, random forest, support vector machines, k-nearest neighbors, decision trees, and gradient boosting models were not suitable; however, multilayer perceptron and linear regression models showed appropriate suitability and despite the sharp increase in Dollar/TL rates in Turkey as of 2019, the suitability of valid models has been maintained. |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2411.04259 |