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An unbiased GM(1,1)-based new hybrid approach for time series forecasting

R.M. Kapila Tharanga Rathnayaka (School of Economics, Wuhan University of Technology, Wuhan, PR China) (Faculty of Applied Sciences, Sabaragamuwa University of Sri Lanka, Belihuloya, Sri Lanka)
D.M.K.N. Seneviratna (Faculty of Engineering, University of Ruhuna, Galle, Sri Lanka)
Wei Jianguo (School of Economics, Wuhan University of Technology, Wuhan, PR China)
Hasitha Indika Arumawadu (School of Computer Science, Wuhan University of Technology, Wuhan, PR China)

Grey Systems: Theory and Application

ISSN: 2043-9377

Article publication date: 7 November 2016

195

Abstract

Purpose

The time series forecasting is an essential methodology which can be used for analysing time series data in order to extract meaningful statistics based on the information obtained from past and present. These modelling approaches are particularly complicated when the available resources are limited as well as anomalous. The purpose of this paper is to propose a new hybrid forecasting approach based on unbiased GM(1,1) and artificial neural network (UBGM_BPNN) to forecast time series patterns to predict future behaviours. The empirical investigation was conducted by using daily share prices in Colombo Stock Exchange, Sri Lanka.

Design/methodology/approach

The methodology of this study is running under three main phases as follows. In the first phase, traditional grey operational mechanisms, namely, GM(1,1), unbiased GM(1,1) and nonlinear grey Bernoulli model, are used. In the second phase, the new proposed hybrid approach, namely, UBGM_BPNN was implemented successfully for forecasting short-term predictions under high volatility. In the last stage, to pick out the most suitable model for forecasting with a limited number of observations, three model-accuracy standards were employed. They are mean absolute deviation, mean absolute percentage error and root-mean-square error.

Findings

The empirical results disclosed that the UNBG_BPNN model gives the minimum error accuracies in both training and testing stages. Furthermore, results indicated that UNBG_BPNN affords the best simulation result than other selected models.

Practical implications

The authors strongly believe that this study will provide significant contributions to domestic and international policy makers as well as government to open up a new direction to develop investments in the future.

Originality/value

The new proposed UBGM_BPNN hybrid forecasting methodology is better to handle incomplete, noisy, and uncertain data in both model building and ex post testing stages.

Keywords

Citation

Rathnayaka, R.M.K.T., Seneviratna, D.M.K.N., Jianguo, W. and Arumawadu, H.I. (2016), "An unbiased GM(1,1)-based new hybrid approach for time series forecasting", Grey Systems: Theory and Application, Vol. 6 No. 3, pp. 322-340. https://doi.org/10.1108/GS-04-2016-0009

Publisher

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Emerald Group Publishing Limited

Copyright © 2016, Emerald Group Publishing Limited

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