This package contains the forecasting algorithm developed by Adämmer, Lehmann and Schüssler (2023). Please cite the paper when using the package.
The package comprises four functions:
-
stsc()can be used to directly apply the “Signal-Transform-Subset-Combination” forecasting algorithm described in Adämmer, Lehmann and Schüssler (2023). -
tvc()can be used to compute density forecasts based on univariate time-varying coefficient (TV-C) models in state-space form (first part of the STSC algorithm). -
dsc()can be used to dynamically generate forecast combinations from a subset of candidate density forecasts (second part of the STSC algorithm). -
summary_stsc()returns a statistical summary for the forecasting results. It provides statistical measures such as Clark-West-Statistic, OOS-R2, Mean-Squared-Error and Cumulated Sum of Squared-Error-Differences.
You can install the released version of hdflex from CRAN:
install.packages("hdflex")You can install hdflex from GitHub:
# install.packages("devtools")
devtools::install_github("https://github.com/lehmasve/hdflex")The package compiles some C++ source code for installation, which is why you need the appropriate compilers:
-
On Windows you need Rtools available from CRAN.
-
On macOS you need the very least Xcode and a Fortran compiler - for more details see Compiler.
First example using the stsc() function:
#########################################################
######### Forecasting quarterly U.S. inflation ##########
#### Please see Koop & Korobilis (2023) for further ####
#### details regarding the data & external forecasts ####
#########################################################
# Packages
library("hdflex")
########## Get Data ##########
# Load Data
inflation_data <- inflation_data
benchmark_ar2 <- benchmark_ar2
# Set Index for Target Variable
i <- 1 # (1 -> GDPCTPI; 2 -> PCECTPI; 3 -> CPIAUCSL; 4 -> CPILFESL)
# Subset Data (keep only data relevant for target variable i)
dataset <- inflation_data[, c(1+(i-1), # Target Variable
5+(i-1), # Lag 1
9+(i-1), # Lag 2
(13:16)[-i], # Remaining Price Series
17:452, # Exogenous Predictor Variables
seq(453+(i-1)*16,468+(i-1)*16))] # Ext. Point Forecasts
########## STSC ##########
# Set Target Variable
y <- dataset[, 1, drop = FALSE]
# Set 'Simple' Signals
X <- dataset[, 2:442, drop = FALSE]
# Set External Point Forecasts (Koop & Korobilis 2023)
F <- dataset[, 443:458, drop = FALSE]
# Set Dates
dates <- rownames(dataset)
# Set TV-C-Parameter
sample_length <- 4 * 5
lambda_grid <- c(0.90, 0.95, 1)
kappa_grid <- 0.98
# Set DSC-Parameter
gamma_grid <- c(0.40, 0.50, 0.60, 0.70, 0.80, 0.90,
0.91, 0.92, 0.93, 0.94, 0.95, 0.96, 0.97, 0.98, 0.99, 1.00)
psi_grid <- c(1:100)
delta <- 0.95
# Apply STSC-Function
results <- hdflex::stsc(y,
X,
F,
sample_length,
lambda_grid,
kappa_grid,
burn_in_tvc = 79,
gamma_grid,
psi_grid,
delta,
burn_in_dsc = 1,
method = 1,
equal_weight = TRUE,
risk_aversion = NULL,
min_weight = NULL,
max_weight = NULL)
# Assign STSC-Results
forecast_stsc <- results[[1]]
variance_stsc <- results[[2]]
chosen_gamma <- results[[3]]
chosen_psi <- results[[4]]
chosen_signals <- results[[5]]
# Define Evaluation Period (OOS-Period)
eval_date_start <- "1991-01-01"
eval_date_end <- "2021-12-31"
eval_period_idx <- which(dates > eval_date_start & dates <= eval_date_end)
# Trim Objects to Evaluation Period (OOS-Period)
oos_y <- y[eval_period_idx, ]
oos_forecast_stsc <- forecast_stsc[eval_period_idx]
oos_variance_stsc <- variance_stsc[eval_period_idx]
oos_chosen_gamma <- chosen_gamma[eval_period_idx]
oos_chosen_psi <- chosen_psi[eval_period_idx]
oos_chosen_signals <- chosen_signals[eval_period_idx, , drop = FALSE]
oos_dates <- dates[eval_period_idx]
# Add Dates
names(oos_forecast_stsc) <- oos_dates
names(oos_variance_stsc) <- oos_dates
names(oos_chosen_gamma) <- oos_dates
names(oos_chosen_psi) <- oos_dates
rownames(oos_chosen_signals) <- oos_dates
########## Evaluation ##########
# Apply Summary-Function
summary_results <- summary_stsc(oos_y,
benchmark_ar2[, i],
oos_forecast_stsc)
# Assign Summary-Results
cssed <- summary_results[[3]]
mse <- summary_results[[4]]
########## Visualization ##########
# Create CSSED-Plot
p1 <- plot(x = as.Date(oos_dates),
y = cssed,
ylim = c(-0.0008, 0.0008),
main = "Cumulated squared error differences",
type = "l",
lwd = 1.5,
xlab = "Date",
ylab = "CSSED") + abline(h = 0, lty = 2, col = "darkgray")
# Create Predictive Signals-Plot
vec <- seq_len(dim(oos_chosen_signals)[2])
mat <- oos_chosen_signals %*% diag(vec)
mat[mat == 0] <- NA
p2 <- matplot(x = as.Date(oos_dates),
y = mat,
cex = 0.4,
pch = 20,
type = "p",
main = "Evolution of selected signal(s)",
xlab = "Date",
ylab = "Predictive Signal")
# Create Psi-Plot
p3 <- plot(x = as.Date(oos_dates),
y = oos_chosen_psi,
ylim = c(1, 100),
main = "Evolution of the subset size",
type = "p",
cex = 0.75,
pch = 20,
xlab = "Date",
ylab = "Psi")
# Relative MSE
print(paste("Relative MSE:", round(mse[[1]] / mse[[2]], 4)))
# Print Plots
print(p1)
print(p2)
print(p3)Second example using the tvc() and dsc() functions:
#########################################################
######### Forecasting quarterly U.S. inflation ##########
#### Please see Koop & Korobilis (2023) for further ####
#### details regarding the data & external forecasts ####
#########################################################
# Packages
library("hdflex")
########## Get Data ##########
# Load Data
inflation_data <- inflation_data
benchmark_ar2 <- benchmark_ar2
# Set Index for Target Variable
i <- 1 # (1 -> GDPCTPI; 2 -> PCECTPI; 3 -> CPIAUCSL; 4 -> CPILFESL)
# Subset Data (keep only data relevant for target variable i)
dataset <- inflation_data[, c(1+(i-1), # Target Variable
5+(i-1), # Lag 1
9+(i-1), # Lag 2
(13:16)[-i], # Remaining Price Series
17:452, # Exogenous Predictor Variables
seq(453+(i-1)*16,468+(i-1)*16))] # Ext. Point Forecasts
########## STSC ##########
### Part 1: TV-C Model ###
# Set Target Variable
y <- dataset[, 1, drop = FALSE]
# Set 'Simple' Signals
X <- dataset[, 2:442, drop = FALSE]
# Set External Point Forecasts (Koop & Korobilis 2023)
F <- dataset[, 443:458, drop = FALSE]
# Set TV-C-Parameter
sample_length <- 4 * 5
lambda_grid <- c(0.90, 0.95, 1)
kappa_grid <- 0.98
n_cores <- 4
# Apply TV-C-Function
results <- hdflex::tvc(y,
X,
F,
lambda_grid,
kappa_grid,
sample_length,
n_cores)
# Assign TV-C-Results
forecast_tvc <- results[[1]]
variance_tvc <- results[[2]]
# Define Burn-In Period
sample_period_idx <- 80:nrow(dataset)
sub_forecast_tvc <- forecast_tvc[sample_period_idx, , drop = FALSE]
sub_variance_tvc <- variance_tvc[sample_period_idx, , drop = FALSE]
sub_y <- y[sample_period_idx, , drop = FALSE]
sub_dates <- rownames(dataset)[sample_period_idx]
### Part 2: Dynamic Subset Combination ###
# Set DSC-Parameter
nr_mods <- ncol(sub_forecast_tvc)
gamma_grid <- c(0.40, 0.05, 0.60, 0.70, 0.80, 0.90,
0.91, 0.92, 0.93, 0.94, 0.95, 0.96, 0.97, 0.98, 0.99, 1.00)
psi_grid <- c(1:100)
delta <- 0.95
n_cores <- 4
# Apply DSC-Function
results <- hdflex::dsc(gamma_grid,
psi_grid,
sub_y,
sub_forecast_tvc,
sub_variance_tvc,
delta,
n_cores)
# Assign DSC-Results
sub_forecast_stsc <- results[[1]]
sub_variance_stsc <- results[[2]]
sub_chosen_gamma <- results[[3]]
sub_chosen_psi <- results[[4]]
sub_chosen_signals <- results[[5]]
# Define Evaluation Period (OOS-Period)
eval_date_start <- "1991-01-01"
eval_date_end <- "2021-12-31"
eval_period_idx <- which(sub_dates > eval_date_start & sub_dates <= eval_date_end)
# Trim Objects to Evaluation Period (OOS-Period)
oos_y <- sub_y[eval_period_idx, ]
oos_forecast_stsc <- sub_forecast_stsc[eval_period_idx]
oos_variance_stsc <- sub_variance_stsc[eval_period_idx]
oos_chosen_gamma <- sub_chosen_gamma[eval_period_idx]
oos_chosen_psi <- sub_chosen_psi[eval_period_idx]
oos_chosen_signals <- sub_chosen_signals[eval_period_idx, , drop = FALSE]
oos_dates <- sub_dates[eval_period_idx]
# Add Dates
names(oos_forecast_stsc) <- oos_dates
names(oos_variance_stsc) <- oos_dates
names(oos_chosen_gamma) <- oos_dates
names(oos_chosen_psi) <- oos_dates
rownames(oos_chosen_signals) <- oos_dates
### Part 3: Evaluation ###
# Apply Summary-Function
summary_results <- summary_stsc(oos_y,
benchmark_ar2[, i],
oos_forecast_stsc)
# Assign Summary-Results
cssed <- summary_results[[3]]
mse <- summary_results[[4]]
########## Visualization ##########
# Create CSSED-Plot
p1 <- plot(x = as.Date(oos_dates),
y = cssed,
ylim = c(-0.0008, 0.0008),
main = "Cumulated squared error differences",
type = "l",
lwd = 1.5,
xlab = "Date",
ylab = "CSSED") + abline(h = 0, lty = 2, col = "darkgray")
# Create Predictive Signals-Plot
vec <- seq_len(dim(oos_chosen_signals)[2])
mat <- oos_chosen_signals %*% diag(vec)
mat[mat == 0] <- NA
p2 <- matplot(x = as.Date(oos_dates),
y = mat,
cex = 0.4,
pch = 20,
type = "p",
main = "Evolution of selected signal(s)",
xlab = "Date",
ylab = "Predictive Signal")
# Create Psi-Plot
p3 <- plot(x = as.Date(oos_dates),
y = oos_chosen_psi,
ylim = c(1, 100),
main = "Evolution of the subset size",
type = "p",
cex = 0.75,
pch = 20,
xlab = "Date",
ylab = "Psi")
# Relative MSE
print(paste("Relative MSE:", round(mse[[1]] / mse[[2]], 4)))
# Print Plots
print(p1)
print(p2)
print(p3)
Philipp Adämmer, Sven Lehmann and Rainer Schüssler
GPL (>= 2)