A functional wavelet-kernel approach for time series prediction

Abstract

We consider the prediction problem of a time series on a whole time interval in terms of its past. The approach that we adopt is based on functional kernel nonparametric regression estimation techniques where observations are discrete recordings of segments of an underlying stochastic process considered as curves. These curves are assumed to lie within the space of continuous functions, and the discretized time series data set consists of a relatively small, compared with the number of segments, number of measurements made at regular times. We estimate conditional expectations by using appropriate wavelet decompositions of the segmented sample paths. A notion of similarity, based on wavelet decompositions, is used to calibrate the prediction. Asymptotic properties when the number of segments grows to ∞ are investigated under mild conditions, and a nonparametric resampling procedure is used to generate, in a flexible way, valid asymptotic pointwise prediction intervals for the trajectories predicted. We illustrate the usefulness of the proposed functional wavelet-kernel methodology in finite sample situations by means of a simulated example and two real life data sets, and we compare the resulting predictions with those obtained by three other methods in the literature, in particular with a smoothing spline method, with an exponential smoothing procedure and with a seasonal autoregressive integrated moving average model. © 2006 Royal Statistical Society.