Vector and recurrent singular spectrum analysis: which is better at forecasting?

Mansi Ghodsi, Hossein Hassani, Donya Rahmani and Emmanuel Sirimal Silva

Journal of Applied Statistics, 2018, vol. 45, issue 10, 1872-1899

Abstract: Singular spectrum analysis (SSA) is an increasingly popular and widely adopted filtering and forecasting technique which is currently exploited in a variety of fields. Given its increasing application and superior performance in comparison to other methods, it is pertinent to study and distinguish between the two forecasting variations of SSA. These are referred to as Vector SSA (SSA-V) and Recurrent SSA (SSA-R). The general notion is that SSA-V is more robust and provides better forecasts than SSA-R. This is especially true when faced with time series which are non-stationary and asymmetric, or affected by unit root problems, outliers or structural breaks. However, currently there exists no empirical evidence for proving the above notions or suggesting that SSA-V is better than SSA-R. In this paper, we evaluate out-of-sample forecasting capabilities of the optimised SSA-V and SSA-R forecasting algorithms via a simulation study and an application to 100 real data sets with varying structures, to provide a statistically reliable answer to the question of which SSA algorithm is best for forecasting at both short and long run horizons based on several important criteria.

Date: 2018
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Citations: View citations in EconPapers (7)

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DOI: 10.1080/02664763.2017.1401050

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