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Predicting the present with Bayesian structural time series. (English) Zbl 1302.62289
Summary: This article describes a system for short term forecasting based on an ensemble prediction that averages over different combinations of predictors. The system combines a structural time series model for the target series with a regression component capturing the contributions of contemporaneous search query data. A spike-and-slab prior on the regression coefficients induces sparsity, dramatically reducing the size of the regression problem. Our system averages over potential contributions from a very large set of models and gives easily digested reports of which coefficients are likely to be important. We illustrate with applications to initial claims for unemployment benefits and to retail sales. Although our exposition focuses on using search engine data to forecast economic time series, the underlying statistical methods can be applied to more general short term forecasting with large numbers of contemporaneous predictors.

MSC:
62P20 Applications of statistics to economics
62M20 Inference from stochastic processes and prediction
91B84 Economic time series analysis
65C40 Numerical analysis or methods applied to Markov chains
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