Abstract
We present a novel approach for reconciling hierarchical forecasts, based on Bayes’ rule. We define a prior distribution for the bottom time series of the hierarchy, based on the bottom base forecasts. Then we update their distribution via Bayes’ rule, based on the base forecasts for the upper time series. Under the Gaussian assumption, we derive the updating in closed-form. We derive two algorithms, which differ as for the assumed independencies. We discuss their relation with the MinT reconciliation algorithm and with the Kalman filter, and we compare them experimentally.
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We acknowledge support from grant n. 407540_167199 / 1 from Swiss NSF (NRP 75 Big Data).
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Corani, G., Azzimonti, D., Augusto, J.P.S.C., Zaffalon, M. (2021). Probabilistic Reconciliation of Hierarchical Forecast via Bayes’ Rule. In: Hutter, F., Kersting, K., Lijffijt, J., Valera, I. (eds) Machine Learning and Knowledge Discovery in Databases. ECML PKDD 2020. Lecture Notes in Computer Science(), vol 12459. Springer, Cham. https://doi.org/10.1007/978-3-030-67664-3_13
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DOI: https://doi.org/10.1007/978-3-030-67664-3_13
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