Salvador Torra

A new forecasting approach for the hospitality industry

Purpose – This study aims to apply a new forecasting approach to improve predictions in the hospitality industry. To do so, the authors developed a multivariate setting that allows the incorporation of the cross-correlations in the evolution of tourist arrivals from visitor markets to a specific destination in neural network models. Design/methodology/approach – This multiple-input-multiple-output approach allows the generation of predictions for all visitor markets simultaneously. Official data of tourist arrivals to Catalonia (Spain) from 2001 to 2012 were used to generate forecasts for one, three and six months ahead with three different networks. Findings – The study revealed that multivariate architectures that take into account the connections between different markets may improve the predictive performance of neural networks. Additionally, the authors developed a new forecasting accuracy measure and found that radial basis function networks outperform the rest of the models. Research limitations/im...

Are Spanish Ibex35 stock future index returns forecasted with non-linear models?

This study employs different nonlinear models (smooth transition autoregressive models (STAR), artificial neural networks (ANN) and nearest neighbours (NN)) to study the predictability of one-step-ahead forecast returns for the Ibex35 stock future index at a one year forecast horizon. It is found that the STAR, ANN and NN models beat the random walk (RW) and linear autoregressive (AR) models in out-of-sample forecast statistical accuracy, and also when economic criteria were used in a simple trading strategy including the impact of transaction costs on trading strategy profits. Finally, the overall results suggest that the nonlinear models (particularly ANN and NN) considered for the Ibex35 stock future index appear to provide a reasonable description of asset price movements in improving returns forecasts for the chosen horizon.

Combination forecasts of tourism demand with machine learning models

ABSTRACT The main objective of this study is to analyse whether the combination of regional predictions generated with machine learning (ML) models leads to improved forecast accuracy. With this aim, we construct one set of forecasts by estimating models on the aggregate series, another set by using the same models to forecast the individual series prior to aggregation, and then we compare the accuracy of both approaches. We use three ML techniques: support vector regression, Gaussian process regression and neural network models. We use an autoregressive moving average model as a benchmark. We find that ML methods improve their forecasting performance with respect to the benchmark as forecast horizons increase, suggesting the suitability of these techniques for mid- and long-term forecasting. In spite of the fact that the disaggregated approach yields more accurate predictions, the improvement over the benchmark occurs for shorter forecast horizons with the direct approach.

Quantification of Survey Expectations by Means of Symbolic Regression via Genetic Programming to Estimate Economic Growth in Central and Eastern European Economies

Tendency surveys are the main source of agents’ expectations. This study has a twofold aim. First, it proposes a new method to quantify survey-based expectations by means of symbolic regression (SR) via genetic programming. Second, it combines the main SR-generated indicators to estimate the evolution of GDP, obtaining the best results for the Czech Republic and Hungary. Finally, it assesses the impact of the 2008 financial crisis, finding that the capacity of agents’ expectations to anticipate economic growth in most Central and Eastern European economies improved after the crisis.

Optimal market indices using value-at-risk: a first empirical approach for three stock markets

Since Famas Efficient Market Hypothesis (EMH), numerous authors have argued that it is impossible to constantly beat the market. The best an investor can do is buy and hold ‘the market’ through a market index. Taking into account the important role of market indices as benchmarks against which we compare performance and as tools to prove efficiency or calculate Capital Asset Pricing Model (CAPM), few articles have studied how we should build, weigh or incorporate Modern Portfolio Theory into market index construction. Everybody accepts market indices as an essential part of finance, but nobody seems to care about them. In this article, we propose a different way of calculating market indices, which uses characteristics of optimal portfolios and risk control to establish the components’ weights. We present the minimum risk indices using a Value-at-Risk (VaR) minimization problem and prove that they have less risk than current market indices, and that in some markets they beat the actual market index.

Reversión a la media, no linealidad y cambios de régimen en la evolución temporal del Ibex35

RESUMEN El objetivo de este trabajo es analizar las propiedades estadísticas y la existencia de cambios de régimen que están presentes en la dinámica de los rendimientos diarios del índice de activos del mercado continuo español, desde el comienzo de su negociación el 31 de diciembre de 1989. Como conclusiones más relevantes, pueden destacarse la existencia de una desviación transitoria de la senda del camino aleatorio y una potencial predictibilidad de las rentabilidades; la posibilidad de utilizar la extensa variedad de modelos no lineales—tanto estocásticos como deterministas—para predecir dichas rentabilidades; y la existencia de períodos de elevada y baja varianza y, por tanto, cambios de régimen durante el ciclo bursátil.

Economic Uncertainty: A Geometric Indicator of Discrepancy Among Experts’ Expectations

In this study we present a geometric approach to proxy economic uncertainty. We design a positional indicator of disagreement among survey-based agents’ expectations about the state of the economy. Previous dispersion-based uncertainty indicators derived from business and consumer surveys exclusively make use of the two extreme pieces of information: the percentage of respondents expecting a variable to rise and to fall. With the aim of also incorporating the information coming from the share of respondents expecting a variable to remain constant, we propose a geometrical framework and use a barycentric coordinate system to generate a measure of disagreement, referred to as a discrepancy indicator. We assess its performance both empirically and experimentally by comparing it to the standard deviation of the share of positive and negative responses. When applied in sixteen European countries, we find that both time-varying metrics co-evolve in most countries for expectations about the country’s overall economic situation in the present, but not in the future. Additionally, we obtain their simulated sampling distributions and we find that the proposed indicator gravitates uniformly towards the three vertices of the simplex representing the three answering categories, as opposed to the standard deviation, which tends to overestimate the level of uncertainty as a result of ignoring the no-change responses. Consequently, we find evidence that the information coming from agents expecting a variable to remain constant has an effect on the measurement of disagreement.

Assessment of the effect of the financial crisis on agents’ expectations through symbolic regression

ABSTRACT Agents’ perceptions on the state of the economy can be affected during economic crises. Tendency surveys are the main source of agents’ expectations. The main objective of this study is to assess the impact of the 2008 financial crisis on agents’ expectations. With this aim, we evaluate the capacity of survey-based expectations to anticipate economic growth in the United States, Japan, Germany and the United Kingdom. We propose a symbolic regression (SR) via genetic programming approach to derive mathematical functional forms that link survey-based expectations to GDP growth. By combining the main SR-generated indicators, we generate estimates of the evolution of GDP. Finally, we analyse the effect of the crisis on the formation of expectations, and we find an improvement in the capacity of agents’ expectations to anticipate economic growth after the crisis in all countries except Germany.

Modelling cross-dependencies between Spain’s regional tourism markets with an extension of the Gaussian process regression model

This study presents an extension of the Gaussian process regression model for multiple-input multiple-output forecasting. This approach allows modelling the cross-dependencies between a given set of input variables and generating a vectorial prediction. Making use of the existing correlations in international tourism demand to all seventeen regions of Spain, the performance of the proposed model is assessed in a multiple-step-ahead forecasting comparison. The results of the experiment in a multivariate setting show that the Gaussian process regression model significantly improves the forecasting accuracy of a multi-layer perceptron neural network used as a benchmark. The results reveal that incorporating the connections between different markets in the modelling process may prove very useful to refine predictions at a regional level.

A multivariate neural network approach to tourism demand forecasting

This study compares the performance of different Artificial Neural Networks models for tourist demand forecasting in a multiple-output framework. We test the forecasting accuracy of three different types of architectures: a multi-layer perceptron network, a radial basis function network and an Elman neural network. We use official statistical data of inbound international tourism demand to Catalonia (Spain) from 2001 to 2012. By means of cointegration analysis we find that growth rates of tourist arrivals from all different countries share a common stochastic trend, which leads us to apply a multivariate out-of-sample forecasting comparison. When comparing the forecasting accuracy of the different techniques for each visitor market and for different forecasting horizons, we find that radial basis function models outperform multi-layer perceptron and Elman networks. We repeat the experiment assuming different topologies regarding the number of lags used for concatenation so as to evaluate the effect of the memory on the forecasting results, and we find no significant differences when additional lags are incorporated. These results reveal the suitability of hybrid models such as radial basis functions that combine supervised and unsupervised learning for economic forecasting with seasonal data.