The grey interval prediction method and its prediction accuracy

Abstract

Purpose

The purpose of this paper is to discuss the interval forecasting, prediction interval and its reliability. When the predicted interval and its reliability are construction, the general rule which must satisfy is studied, grey wrapping band forecasting method is perfect.

Design/methodology/approach

A forecasting method puts forward a process of prediction interval. It also elaborates on the meaning of interval (the probability of the prediction interval including the real value of predicted variable). The general rule is abstracted and summarized by many forecasting cases. The general rule is discussed by axiomatic method.

Findings

The prediction interval is categorized into three types. Three axioms that construction predicted interval must satisfy are put forward. Grey wrapping band forecasting method is improved based on the proposed axioms.

Practical implications

Take the Shanghai composite index as the example, according to the K-line diagram from 4 January 2013 to 9 May 2013, the reliability of predicted rebound height of subsequent two or three trading day does not exceed the upper wrapping curve is 80 per cent. It is significant to understand the forecasting range correctly, build a reasonable range forecasting method and to apply grey wrapping band forecasting method correctly.

Originality/value

Grey wrapping band forecasting method is improved based on the proposed axioms.

Citation

Wang, Y. (2014), "The grey interval prediction method and its prediction accuracy", Grey Systems: Theory and Application, Vol. 4 No. 2, pp. 339-346. https://doi.org/10.1108/GS-05-2014-0013