Neural network can beat conventional forecasts – Kansas City Fed research
Deep learning model outperforms Survey of Professional Forecasters at all horizons
Machine learning techniques can overcome many of the shortcomings in conventional forecasting, researchers at the Federal Reserve Bank of Kansas City say in a new working paper.
Thomas Cook and Aaron Hall use a neural network – a form of “deep learning” – to generate a forecast model while remaining “agnostic” to functional form. They test four different architectures and find the encoder-decoder form, originally designed for language modelling, works best.
Each of the four methods produce
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