Jacopo De Stefani, Gianluca Bontempi

Sep 10, 2021
Frontiers in Big Data
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State of the art multivariate forecasting methods are restricted to low dimensional tasks, linear dependencies and short horizons. The technological advances (notably the Big data revolution) are instead shifting the focus to problems characterized by a large number of variables, non linear dependencies and long forecasting horizons. In the last few years, the majority of the best performing techniques for multivariate forecasting have been based on deep learning models. However, such models are characterized by high requirements in terms of data availability and computational resources and suffer from a lack of interpretability. To cope with the limitations of these methods, we propose an extension to the DFML framework, a hybrid forecasting technique inspired by the Dynamic Factor Model (DFM) approach, a successful forecasting methodology in econometrics. This extension improves the capabilities of the DFM approach, by implementing and assessing both linear and non linear factor estimation techniques as well as model driven and data driven factor forecasting techniques. We assess several method integrations within the DFML, and we show that the proposed technique provides competitive results both in terms of forecasting accuracy and computational efficiency on multiple very large scale (>102 variables and > 103 samples) real forecasting tasks.
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