Signal Diffusion Mapping: Optimal Forecasting with Time Varying Lags
15 Pages Posted: 23 Sep 2014 Last revised: 24 Sep 2014
Date Written: September 23, 2014
Abstract
We introduce a new methodology for forecasting which we call Signal Diffusion Mapping. Our approach accommodates features of real world financial data which have been ignored historically in existing forecasting methodologies. Our method builds upon well-established and accepted methods from other areas of statistical analysis. We develop and adapt those models for use in forecasting. We also present tests of our model on data in which we demonstrate the efficacy of our approach.
Keywords: forecasting, lead lag, Bayes theorm, state space models, finance
JEL Classification: C53, C32, C22, C11
Suggested Citation: Suggested Citation