csrec: Optimal combination cross-sectional reconciliation

Description

This function performs optimal (in least squares sense) combination cross-sectional forecast reconciliation for a linearly constrained (e.g., hierarchical/grouped) multiple time series (Wickramasuriya et al., 2019, Panagiotelis et al., 2022, Girolimetto and Di Fonzo, 2023). The reconciled forecasts are calculated using either a projection approach (Byron, 1978, 1979) or the equivalent structural approach by Hyndman et al. (2011). Non-negative (Di Fonzo and Girolimetto, 2023) and immutable (including Zhang et al., 2023) reconciled forecasts can be considered.

Usage

csrec(base, agg_mat, cons_mat, comb = "ols", res = NULL, approach = "proj",
      nn = NULL, settings = NULL, bounds = NULL, immutable = NULL, ...)

Value

A (\(h \times n\)) numeric matrix of cross-sectional reconciled forecasts.

Arguments

base

A (\(h \times n\)) numeric matrix or multivariate time series (mts class) containing the base forecasts to be reconciled; \(h\) is the forecast horizon, and \(n\) is the total number of time series (\(n = n_a + n_b\)).

agg_mat

A (\(n_a \times n_b\)) numeric matrix representing the cross-sectional aggregation matrix. It maps the \(n_b\) bottom-level (free) variables into the \(n_a\) upper (constrained) variables.

cons_mat

A (\(n_a \times n\)) numeric matrix representing the cross-sectional zero constraints. It spans the null space for the reconciled forecasts.

comb

A string specifying the reconciliation method. For a complete list, see cscov.

res

An (\(N \times n\)) optional numeric matrix containing the in-sample residuals. This matrix is used to compute some covariance matrices.

approach

A string specifying the approach used to compute the reconciled forecasts. Options include:

"proj" (default): Projection approach according to Byron (1978, 1979).
"strc": Structural approach as proposed by Hyndman et al. (2011).
"proj_osqp": Numerical solution using osqp for projection approach.
"strc_osqp": Numerical solution using osqp for structural approach.

nn

A string specifying the algorithm to compute non-negative reconciled forecasts:

"osqp": quadratic programming optimization (osqp solver).
"sntz": heuristic "set-negative-to-zero" (Di Fonzo and Girolimetto, 2023).

settings

An object of class osqpSettings specifying settings for the osqp solver. For details, refer to the osqp documentation (Stellato et al., 2020).

bounds

A (\(n \times 2\)) numeric matrix specifying the cross-sectional bounds. The first column represents the lower bound, and the second column represents the upper bound.

immutable

A numeric vector containing the column indices of the base forecasts (base parameter) that should be fixed.

...

Arguments passed on to cscov

mse: If TRUE (default) the residuals used to compute the covariance matrix are not mean-corrected.

shrink_fun

Shrinkage function of the covariance matrix, shrink_estim (default).

References

Byron, R.P. (1978), The estimation of large social account matrices, Journal of the Royal Statistical Society, Series A, 141, 3, 359-367. tools:::Rd_expr_doi("10.2307/2344807")

Byron, R.P. (1979), Corrigenda: The estimation of large social account matrices, Journal of the Royal Statistical Society, Series A, 142(3), 405. tools:::Rd_expr_doi("10.2307/2982515")

Di Fonzo, T. and Girolimetto, D. (2023), Spatio-temporal reconciliation of solar forecasts, Solar Energy, 251, 13–29. tools:::Rd_expr_doi("10.1016/j.solener.2023.01.003")

Girolimetto, D. and Di Fonzo, T. (2023), Point and probabilistic forecast reconciliation for general linearly constrained multiple time series, Statistical Methods & Applications, in press. tools:::Rd_expr_doi("10.1007/s10260-023-00738-6").

Hyndman, R.J., Ahmed, R.A., Athanasopoulos, G. and Shang, H.L. (2011), Optimal combination forecasts for hierarchical time series, Computational Statistics & Data Analysis, 55, 9, 2579-2589. tools:::Rd_expr_doi("10.1016/j.csda.2011.03.006")

Panagiotelis, A., Athanasopoulos, G., Gamakumara, P. and Hyndman, R.J. (2021), Forecast reconciliation: A geometric view with new insights on bias correction, International Journal of Forecasting, 37, 1, 343–359. tools:::Rd_expr_doi("10.1016/j.ijforecast.2020.06.004")

Stellato, B., Banjac, G., Goulart, P., Bemporad, A. and Boyd, S. (2020), OSQP: An Operator Splitting solver for Quadratic Programs, Mathematical Programming Computation, 12, 4, 637-672. tools:::Rd_expr_doi("10.1007/s12532-020-00179-2")

Wickramasuriya, S.L., Athanasopoulos, G. and Hyndman, R.J. (2019), Optimal forecast reconciliation for hierarchical and grouped time series through trace minimization, Journal of the American Statistical Association, 114, 526, 804-819. tools:::Rd_expr_doi("10.1080/01621459.2018.1448825")

Zhang, B., Kang, Y., Panagiotelis, A. and Li, F. (2023), Optimal reconciliation with immutable forecasts, European Journal of Operational Research, 308(2), 650–660. tools:::Rd_expr_doi("10.1016/j.ejor.2022.11.035")

Examples

Run this code

set.seed(123)
# (2 x 3) base forecasts matrix (simulated), Z = X + Y
base <- matrix(rnorm(6, mean = c(20, 10, 10)), 2, byrow = TRUE)
# (10 x 3) in-sample residuals matrix (simulated)
res <- t(matrix(rnorm(n = 30), nrow = 3))

# Aggregation matrix for Z = X + Y
A <- t(c(1,1))
reco <- csrec(base = base, agg_mat = A, comb = "wls", res = res)

# Zero constraints matrix for Z - X - Y = 0
C <- t(c(1, -1, -1))
reco <- csrec(base = base, cons_mat = C, comb = "wls", res = res) # same results

# Non negative reconciliation
base[1,3] <- -base[1,3] # Making negative one of the base forecasts for variable Y
nnreco <- csrec(base = base, agg_mat = A, comb = "wls", res = res, nn = "osqp")
recoinfo(nnreco, verbose = FALSE)$info