Inter-regional dependence of J-REIT stock prices: A heteroscedasticity-robust time series approach

Motegi, Kaiji; Iitsuka, Yoshitaka

doi:10.1016/j.najef.2022.101840

Cited by 4 publications

(1 citation statement)

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“…For example, in the investment portfolio selection process, we would like to predict stock prices by using some economic indicators. However, due to market instability, stock prices may fluctuate significantly differently during different market phases, resulting in the variance of the error term varying with the state of the market [21]. Consequently, an investor might underestimate the risks associated with certain stocks in turbulent times, resulting in overexposure to volatile assets and potential financial losses.…”

Section: Introductionmentioning

confidence: 99%

Data Transformation in the Predict-Then-Optimize Framework: Enhancing Decision Making under Uncertainty

Tian,

Guan,

Wang

2023

Mathematics

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Decision making under uncertainty is pivotal in real-world scenarios, such as selecting the shortest transportation route amidst variable traffic conditions or choosing the best investment portfolio during market fluctuations. In today’s big data age, while the predict-then-optimize framework has become a standard method for tackling uncertain optimization challenges using machine learning tools, many prediction models overlook data intricacies such as outliers and heteroskedasticity. These oversights can degrade decision-making quality. To enhance predictive accuracy and consequent decision-making quality, we introduce a data transformation technique into the predict-then-optimize framework. Our approach transforms target values in linear regression, decision tree, and random forest models using a power function, aiming to boost their predictive prowess and, in turn, drive better decisions. Empirical validation on several datasets reveals marked improvements in decision tree and random forest models. In contrast, the benefits of linear regression are nuanced. Thus, while data transformation can bolster the predict-then-optimize framework, its efficacy is model-dependent. This research underscores the potential of tailoring transformation techniques for specific models to foster reliable and robust decision-making under uncertainty.

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Section: Introductionmentioning

confidence: 99%