Results 1  10
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35
Forecast Combinations
 Handbook of Economic Forecasting
, 2006
"... Forecast combinations have frequently been found in empirical studies to produce better forecasts on average than methods based on the exante best individual forecasting model. Moreover, simple combinations that ignore correlations between forecast errors often dominate more refined combination sch ..."
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Cited by 52 (2 self)
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Forecast combinations have frequently been found in empirical studies to produce better forecasts on average than methods based on the exante best individual forecasting model. Moreover, simple combinations that ignore correlations between forecast errors often dominate more refined combination schemes aimed at estimating the theoretically optimal combination weights. In this chapter we analyze theoretically the factors that determine the advantages from combining forecasts (for example, the degree of correlation between forecast errors and the relative size of the individual models’ forecast error variances). Although the reasons for the success of simple combination schemes are poorly understood, we discuss several possibilities related to model misspecification, instability (nonstationarities) and estimation error in situations where thenumbersofmodelsislargerelativetothe available sample size. We discuss the role of combinations under asymmetric loss and consider combinations of point, interval and probability forecasts. Key words: Forecast combinations; pooling and trimming; shrinkage methods; model misspecification, diversification gains
Portfolio theory of information retrieval
 In SIGIR ’09: Proc. 32nd Int. ACM SIGIR Conf. on Research and Development in IR
, 2009
"... This paper studies document ranking under uncertainty. It is tackled in a general situation where the relevance predictions of individual documents have uncertainty, and are dependent between each other. Inspired by the Modern Portfolio Theory, an economic theory dealing with investment in financial ..."
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Cited by 46 (6 self)
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This paper studies document ranking under uncertainty. It is tackled in a general situation where the relevance predictions of individual documents have uncertainty, and are dependent between each other. Inspired by the Modern Portfolio Theory, an economic theory dealing with investment in financial markets, we argue that ranking under uncertainty is not just about picking individual relevant documents, but about choosing the right combination of relevant documents. This motivates us to quantify a ranked list of documents on the basis of its expected overall relevance (mean) and its variance; the latter serves as a measure of risk, which was rarely studied for document ranking in the past. Through the analysis of the mean and variance, we show that an optimal rank order is the one that balancing the overall relevance (mean) of the ranked list against its risk level (variance). Based on this principle, we then derive an efficient document ranking algorithm. It generalizes the wellknown probability ranking principle (PRP) by considering both the uncertainty of relevance predictions and correlations between retrieved documents. Moreover, the benefit of diversification is mathematically quantified; we show that diversifying documents is an effective way to reduce the risk of document ranking. Experimental results in text retrieval confirm the theoretical insights with improved retrieval performance.
2007a, Properties of Optimal Forecasts under Asymmetric Loss and Nonlinearity
 Journal of Econometrics
"... Evaluation of forecast optimality in economics and finance has almost exclusively been conducted under the assumption of mean squared error loss. Under this loss function optimal forecasts should be unbiased and forecast errors serially uncorrelated at the single period horizon with increasing varia ..."
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Cited by 22 (6 self)
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Evaluation of forecast optimality in economics and finance has almost exclusively been conducted under the assumption of mean squared error loss. Under this loss function optimal forecasts should be unbiased and forecast errors serially uncorrelated at the single period horizon with increasing variance as the forecast horizon grows. Using analytical results we show that standard properties of optimal forecasts can be invalid under asymmetric loss and nonlinear data generating processes and thus may be very misleading as a benchmark for an optimal forecast. We establish instead that a suitable transformation of the forecast error known as the generalized forecast error possesses an equivalent set of properties. The paper also provides empirical examples to illustrate the significance in practice of asymmetric loss and nonlinearities and discusses the effect of parameter estimation error on optimal forecasts.
2008, Biases in Macroeconomic Forecasts: Irrationality or Asymmetric Loss
 Journal of European Economic Association
"... Empirical studies using survey data on expectations have frequently observed that forecasts are biased and have concluded that agents are not rational. We establish that existing rationality tests are not robust to even small deviations from symmetric loss and hence have little ability to tell wheth ..."
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Cited by 18 (1 self)
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Empirical studies using survey data on expectations have frequently observed that forecasts are biased and have concluded that agents are not rational. We establish that existing rationality tests are not robust to even small deviations from symmetric loss and hence have little ability to tell whether the forecaster is irrational or the loss function is asymmetric. We quantify the exact tradeoff between forecast inefficiency and asymmetric loss leading to identical outcomes of standard rationality tests and explore new and more general methods for testing forecast rationality jointly with flexible families of loss functions that embed quadratic loss as a special case. An empirical application to survey data on forecasts of nominal output growth demonstrates the empirical significance of our results and finds that rejections of rationality may largely have been driven by the assumption of symmetric loss.
Reference analysis
 In Handbook of Statistics 25
, 2005
"... This chapter describes reference analysis, a method to produce Bayesian inferential statements which only depend on the assumed model and the available data. Statistical information theory is used to define the reference prior function as a mathematical description of that situation where data would ..."
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Cited by 13 (2 self)
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This chapter describes reference analysis, a method to produce Bayesian inferential statements which only depend on the assumed model and the available data. Statistical information theory is used to define the reference prior function as a mathematical description of that situation where data would best dominate prior knowledge about the quantity of interest. Reference priors are not descriptions of personal beliefs; they are proposed as formal consensus prior functions to be used as standards for scientific communication. Reference posteriors are obtained by formal use of Bayes theorem with a reference prior. Reference prediction is achieved by integration with a reference posterior. Reference decisions are derived by minimizing a reference posterior expected loss. An information theory based loss function, the intrinsic discrepancy, may be used to derive reference procedures for conventional inference problems in scientific investigation, such as point estimation, region estimation and hypothesis testing.
MeanVariance Analysis: A New Document Ranking Theory in Information Retrieval
"... Abstract. This paper concerns document ranking in information retrieval. In information retrieval systems, the widely accepted probability ranking principle (PRP) suggests that, for optimal retrieval, documents should be ranked in order of decreasing probability of relevance. In this paper, we prese ..."
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Cited by 12 (1 self)
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Abstract. This paper concerns document ranking in information retrieval. In information retrieval systems, the widely accepted probability ranking principle (PRP) suggests that, for optimal retrieval, documents should be ranked in order of decreasing probability of relevance. In this paper, we present a new document ranking paradigm, arguing that a better, more general solution is to optimize topn ranked documents as a whole, rather than ranking them independently. Inspired by the Modern Portfolio Theory in finance, we quantify a ranked list of documents on the basis of its expected overall relevance (mean) and its variance; the latter serves as a measure of risk, which was rarely studied for document ranking in the past. Through the analysis of the mean and variance, we show that an optimal rank order is the one that maximizes the overall relevance (mean) of the ranked list at a given risk level (variance). Based on this principle, we then derive an efficient document ranking algorithm. It extends the PRP by considering both the uncertainty of relevance predictions and correlations between retrieved documents. Furthermore, we quantify the benefits of diversification, and theoretically show that diversifying documents is an effective way to reduce the risk of document ranking. Experimental results on the collaborative filtering problem confirms the theoretical insights with improved recommendation performance, e.g., achieved over 300 % performance gain over the PRPbased ranking on the userbased recommendation. 1
Composite Binary Losses
, 2009
"... We study losses for binary classification and class probability estimation and extend the understanding of them from margin losses to general composite losses which are the composition of a proper loss with a link function. We characterise when margin losses can be proper composite losses, explicitl ..."
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Cited by 11 (8 self)
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We study losses for binary classification and class probability estimation and extend the understanding of them from margin losses to general composite losses which are the composition of a proper loss with a link function. We characterise when margin losses can be proper composite losses, explicitly show how to determine a symmetric loss in full from half of one of its partial losses, introduce an intrinsic parametrisation of composite binary losses and give a complete characterisation of the relationship between proper losses and “classification calibrated ” losses. We also consider the question of the “best ” surrogate binary loss. We introduce a precise notion of “best ” and show there exist situations where two convex surrogate losses are incommensurable. We provide a complete explicit characterisation of the convexity of composite binary losses in terms of the link function and the weight function associated with the proper loss which make up the composite loss. This characterisation suggests new ways of “surrogate tuning”. Finally, in an appendix we present some new algorithmindependent results on the relationship between properness, convexity and robustness to misclassification noise for binary losses and show that all convex proper losses are nonrobust to misclassification noise. 1
Nonparametric Bayesian kernel models
 Discussion Paper 200509, Duke University ISDS
, 2007
"... Kernel models for classification and regression have emerged as widely applied tools in statistics and machine learning. We discuss a Bayesian framework and theory for kernel methods, providing a new rationalisation of kernel regression based on nonparametric Bayesian models. Functional analytic re ..."
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Cited by 10 (4 self)
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Kernel models for classification and regression have emerged as widely applied tools in statistics and machine learning. We discuss a Bayesian framework and theory for kernel methods, providing a new rationalisation of kernel regression based on nonparametric Bayesian models. Functional analytic results ensure that such a nonparametric prior specification induces a class of functions that span the reproducing kernel Hilbert space corresponding to the selected kernel. Bayesian analysis of the model allows for direct and formal inference on the uncertain regression or classification functions. Augmenting the model with Bayesian variable selection priors over kernel bandwidth parameters extends the framework to automatically address the key practical questions of kernel feature selection. Novel, customised MCMC methods are detailed and used in example analyses. The practical benefits and modelling flexibility of the Bayesian kernel framework are illustrated in both simulated and real data examples that address prediction and classification inference with highdimensional data.
Risky business: Modeling and exploiting uncertainty in information retrieval
 In SIGIR, 2009. APPENDIX In Section
"... Most retrieval models estimate the relevance of each document to a query and rank the documents accordingly. However, such an approach ignores the uncertainty associated with the estimates of relevancy. If a high estimate of relevancy also has a high uncertainty, then the document may be very releva ..."
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Cited by 8 (4 self)
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Most retrieval models estimate the relevance of each document to a query and rank the documents accordingly. However, such an approach ignores the uncertainty associated with the estimates of relevancy. If a high estimate of relevancy also has a high uncertainty, then the document may be very relevant or not relevant at all. Another document may have a slightly lower estimate of relevancy but the corresponding uncertainty may be much less. In such a circumstance, should the retrieval engine risk ranking the first document highest, or should it choose a more conservative (safer) strategy that gives preference to the second document? There is no definitive answer to this question, as it depends on the risk preferences of the user and the information retrieval system. In this paper we present a general framework for modeling uncertainty and introduce an asymmetric loss function with a single parameter that can model the level of risk the system is willing to accept. By adjusting the risk preference parameter, our approach can effectively adapt to users ’ different retrieval strategies. We apply this asymmetric loss function to a language modeling framework and a practical riskaware document scoring function is obtained. Our experiments on several TREC collections show that our “riskaverse ” approach significantly improves the JelinekMercer smoothing language model, and a combination of our “riskaverse ” approach and the JelinekMercer smoothing method generally outperforms the Dirichlet smoothing method. Experimental results also show that the “riskaverse ” approach, even without smoothing from the collection statistics, performs as well as three commonlyadopted retrieval models, namely, the JelinekMercer and Dirichlet smoothing methods, and BM25 model.
Generalized forecast errors, a change of measure, and forecast optimality conditions. In
 Eds.), Volatility and Time Series Econometrics: Essays in Honor of
, 2010
"... This paper establishes properties of optimal forecasts under general loss functions, extending existing results obtained under speci…c functional forms and data generating processes. We propose a new method that changes the probability measure under which the wellknown properties of optimal forecas ..."
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Cited by 4 (0 self)
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This paper establishes properties of optimal forecasts under general loss functions, extending existing results obtained under speci…c functional forms and data generating processes. We propose a new method that changes the probability measure under which the wellknown properties of optimal forecasts under mean squared error loss can be recovered. We illustrate the proposed methods through an empirical application to U.S. in‡ation forecasting.