1. Exploring the boundaries of predictability What can we forecast and when should we give up? Rob J Hyndman Exploring the boundaries of predictability 1 2. Outline 1 Forecasting is difcult 2 Stock market data 3 Drug sales 4 Extreme electricity demand 5 What can we forecast? 6 M3 competition data 7 Yahoo web trafc 8 What next? Exploring the boundaries of predictability Forecasting is difcult 2 3. Forecasting is difcult Exploring the boundaries of predictability Forecasting is difcult 3 4. Reputations can be made and lost I think there is a world market for maybe ve computers. (Chairman of IBM, 1943) Computers in the future may weigh no more than 1.5 tons. (Popular Mechanics, 1949) There is no reason anyone would want a computer in their home. (President, DEC, 1977) Exploring the boundaries of predictability Forecasting is difcult 4 5. Reputations can be made and lost I think there is a world market for maybe ve computers. (Chairman of IBM, 1943) Computers in the future may weigh no more than 1.5 tons. (Popular Mechanics, 1949) There is no reason anyone would want a computer in their home. (President, DEC, 1977) Exploring the boundaries of predictability Forecasting is difcult 4 6. Reputations can be made and lost I think there is a world market for maybe ve computers. (Chairman of IBM, 1943) Computers in the future may weigh no more than 1.5 tons. (Popular Mechanics, 1949) There is no reason anyone would want a computer in their home. (President, DEC, 1977) Exploring the boundaries of predictability Forecasting is difcult 4 7. Forecasting in a changing environment A good forecasting model captures the way things move, not just where things are. a highly volatile environment will continue to be highly volatile; a business with uctuating sales will continue to have uctuating sales; an economy that has gone through booms and busts will continue to go through booms and busts. If we could rst know where we are and whither we are tending, we could better judge what to do and how to do it. Abraham Lincoln Exploring the boundaries of predictability Forecasting is difcult 5 8. Forecasting in a changing environment A good forecasting model captures the way things move, not just where things are. a highly volatile environment will continue to be highly volatile; a business with uctuating sales will continue to have uctuating sales; an economy that has gone through booms and busts will continue to go through booms and busts. If we could rst know where we are and whither we are tending, we could better judge what to do and how to do it. Abraham Lincoln Exploring the boundaries of predictability Forecasting is difcult 5 9. Forecasting in a changing environment A good forecasting model captures the way things move, not just where things are. a highly volatile environment will continue to be highly volatile; a business with uctuating sales will continue to have uctuating sales; an economy that has gone through booms and busts will continue to go through booms and busts. If we could rst know where we are and whither we are tending, we could better judge what to do and how to do it. Abraham Lincoln Exploring the boundaries of predictability Forecasting is difcult 5 10. Forecasting in a changing environment A good forecasting model captures the way things move, not just where things are. a highly volatile environment will continue to be highly volatile; a business with uctuating sales will continue to have uctuating sales; an economy that has gone through booms and busts will continue to go through booms and busts. If we could rst know where we are and whither we are tending, we could better judge what to do and how to do it. Abraham Lincoln Exploring the boundaries of predictability Forecasting is difcult 5 11. Forecasting in a changing environment A good forecasting model captures the way things move, not just where things are. a highly volatile environment will continue to be highly volatile; a business with uctuating sales will continue to have uctuating sales; an economy that has gone through booms and busts will continue to go through booms and busts. If we could rst know where we are and whither we are tending, we could better judge what to do and how to do it. Abraham Lincoln Exploring the boundaries of predictability Forecasting is difcult 5 12. Outline 1 Forecasting is difcult 2 Stock market data 3 Drug sales 4 Extreme electricity demand 5 What can we forecast? 6 M3 competition data 7 Yahoo web trafc 8 What next? Exploring the boundaries of predictability Stock market data 6 13. Stock market data Exploring the boundaries of predictability Stock market data 7 Daily closing prices: Yahoo Date $ 20304050 2012 2013 2014 2015 14. Stock market data Exploring the boundaries of predictability Stock market data 7 Forecasts from ETS(M,N,N) Date $ 20304050 2012 2013 2014 2015 15. Stock market data Exploring the boundaries of predictability Stock market data 8 Forecasts from ETS(M,N,N) Date $ 20304050 2012 2013 2014 2015 fit