IMPROVING ACCURACY OF PREDICTION INTERVALS OF HOUSEHOLD INCOME USING QUANTILE REGRESSION FOREST AND SELECTION OF EXPLANATORY VARIABLES

Abstract

Quantile regression forest (QRF) is a non-parametric method for estimating the distribution function of response by using the random forest algorithm and constructing conditional quantile prediction intervals. However, if the explanatory factors (covariates) are highly correlated, the quantile regression forest's performance will decrease, resulting in low accuracy of prediction intervals for the outcome variable. The selection of explanatory variables in quantile regression forest is investigated and addressed in this paper, using several selection scenarios that consist of the full model, forward selection, LASSO, ridge regression, and random forest to improve the accuracy of household income data prediction. This data was obtained from National Labour Force Survey in 2021. The results indicate that the random forest method outperforms other methods for explanatory selection utilizing RMSE metrics. With regard to the criteria of average coverage value just above the 95% target and statistical test results, the RF-QRF and Forward-QRF methods outperform the QRF, LASSO-QRF, and Ridge-QRF methods for constructing prediction intervals.