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On improving the forecast accuracy of the hidden Markov model
The forecast accuracy of a hidden Markov model (HMM) may be low due first, to the measure of forecast accuracy being ignored in the parameterestimation method and, second, to overfitting caused by the large number of parameters that must be estimated. A general approach to forecasting is described w...
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| Format: | Thesis |
| Language: | English |
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Division of Actuarial Science
2017
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| _version_ | 1867614049215184896 |
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| access_status_str | Open Access |
| author | Rooney, Thomas J A |
| author2 | MacDonald, Iain L |
| author_browse | MacDonald, Iain L Rooney, Thomas J A |
| author_facet | MacDonald, Iain L Rooney, Thomas J A |
| author_sort | Rooney, Thomas J A |
| collection | Thesis |
| description | The forecast accuracy of a hidden Markov model (HMM) may be low due first, to the measure of forecast accuracy being ignored in the parameterestimation method and, second, to overfitting caused by the large number of parameters that must be estimated. A general approach to forecasting is described which aims to resolve these two problems and so improve the forecast accuracy of the HMM. First, the application of extremum estimators to the HMM is proposed. Extremum estimators aim to improve the forecast accuracy of the HMM by minimising an estimate of the forecast error on the observed data. The forecast accuracy is measured by a score function and the use of some general classes of score functions is proposed. This approach contrasts with the standard use of a minus log-likelihood score function. Second, penalised estimation for the HMM is described. The aim of penalised estimation is to reduce overfitting and so increase the forecast accuracy of the HMM. Penalties on both the state-dependent distribution parameters and transition probability matrix are proposed. In addition, a number of cross-validation approaches for tuning the penalty function are investigated. Empirical assessment of the proposed approach on both simulated and real data demonstrated that, in terms of forecast accuracy, penalised HMMs fitted using extremum estimators generally outperformed unpenalised HMMs fitted using maximum likelihood. |
| format | Thesis |
| id | oai:open.uct.ac.za:11427/22977 |
| institution | University of Cape Town (South Africa) |
| language | eng |
| last_indexed | 2026-06-10T12:45:51.696Z |
| license_str | Not specified — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UCTD — University of Cape Town Open Access Repository |
| publishDate | 2017 |
| publishDateRange | 2017 |
| publishDateSort | 2017 |
| publisher | Division of Actuarial Science |
| publisherStr | Division of Actuarial Science |
| record_format | dspace |
| source_str | UCTD — University of Cape Town Open Access Repository |
| spelling | oai:open.uct.ac.za:11427/22977 On improving the forecast accuracy of the hidden Markov model Rooney, Thomas J A MacDonald, Iain L Actuarial Science The forecast accuracy of a hidden Markov model (HMM) may be low due first, to the measure of forecast accuracy being ignored in the parameterestimation method and, second, to overfitting caused by the large number of parameters that must be estimated. A general approach to forecasting is described which aims to resolve these two problems and so improve the forecast accuracy of the HMM. First, the application of extremum estimators to the HMM is proposed. Extremum estimators aim to improve the forecast accuracy of the HMM by minimising an estimate of the forecast error on the observed data. The forecast accuracy is measured by a score function and the use of some general classes of score functions is proposed. This approach contrasts with the standard use of a minus log-likelihood score function. Second, penalised estimation for the HMM is described. The aim of penalised estimation is to reduce overfitting and so increase the forecast accuracy of the HMM. Penalties on both the state-dependent distribution parameters and transition probability matrix are proposed. In addition, a number of cross-validation approaches for tuning the penalty function are investigated. Empirical assessment of the proposed approach on both simulated and real data demonstrated that, in terms of forecast accuracy, penalised HMMs fitted using extremum estimators generally outperformed unpenalised HMMs fitted using maximum likelihood. 2017-01-24T09:10:10Z 2017-01-24T09:10:10Z 2016 Master Thesis Masters MCom http://hdl.handle.net/11427/22977 eng application/pdf Division of Actuarial Science Faculty of Commerce University of Cape Town |
| spellingShingle | Actuarial Science Rooney, Thomas J A On improving the forecast accuracy of the hidden Markov model |
| thesis_degree_str | Master's |
| title | On improving the forecast accuracy of the hidden Markov model |
| title_full | On improving the forecast accuracy of the hidden Markov model |
| title_fullStr | On improving the forecast accuracy of the hidden Markov model |
| title_full_unstemmed | On improving the forecast accuracy of the hidden Markov model |
| title_short | On improving the forecast accuracy of the hidden Markov model |
| title_sort | on improving the forecast accuracy of the hidden markov model |
| topic | Actuarial Science |
| url | http://hdl.handle.net/11427/22977 |
| work_keys_str_mv | AT rooneythomasja onimprovingtheforecastaccuracyofthehiddenmarkovmodel |