An averaging approach to individual time series employing econometric models: a case study on NN5 ATM transactions data

Abstract

Purpose

The research objective is to increase the computational efficiency of the automated teller machine (ATM) cash demand forecasting problem. It proposes a practical decision-making process that uses aggregated time series of a bank's ATM network. The purpose is to decrease ATM numbers that will be forecasted by individual models, by finding the machines’ cluster where the forecasting results of the aggregated series are appropriate to use.

Design/methodology/approach

A comparative statistical forecasting approach is proposed in order to reduce the calculation complexity of an ATM network by using the NN5 competition data set. Integrated autoregressive moving average (ARIMA) and its seasonal version SARIMA are fitted to each time series. Then, averaged time series are introduced to simplify the forecasting process carried out for each ATM. The ATMs that are forecastable with the averaged series are identified by calculating the forecasting accuracy change in each machine.

Findings

The proposed approach is evaluated by different error metrics and is compared to the literature findings. The results show that the ATMs that have tolerable accuracy loss may be considered as a cluster and can be forecasted with a single model based on the aggregated series.

Research limitations/implications

The research is based on the public data set. Financial institutions do not prefer to share their ATM transactions data, therefore accessible data are limited.

Practical implications

The proposed practical approach will be beneficial for financial institutions to use, that hold an excessive number of ATMs because it reduces the computational time and resources allocated for the forecasting process.

Originality/value

This study offers an effective simplified methodology to the challenging cash demand forecasting process by introducing an aggregated time series approach.

Citation

Cedolin, M. and Erol Genevois, M. (2022), "An averaging approach to individual time series employing econometric models: a case study on NN5 ATM transactions data", Kybernetes, Vol. 51 No. 9, pp. 2673-2694. https://doi.org/10.1108/K-03-2021-0235