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arXiv · 2408.13393

WASP: Voting-based ex Ante method for Selecting joint Prediction strategy

Alicja Wolny-Dominiak·Tomasz Żądło
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Abstract

This paper addresses the topic of choosing a prediction strategy when using parametric or nonparametric regression models. It emphasizes the importance of ex ante prediction accuracy, ensemble approaches, and forecasting not only the values of the dependent variable but also a function of these values, such as total income or median loss. It proposes a method for selecting a strategy for predicting the vector of functions of the dependent variable using various ex ante accuracy measures. The final decision is made through voting, where the candidates are prediction strategies and the voters are diverse prediction models with their respective prediction errors. Because the method is based on a Monte Carlo simulation, it allows for new scenarios, not previously observed, to be considered. The first part of the article provides a detailed theoretical description of the proposed method, while the second part presents its practical use in managing a portfolio of communication insurance. The example uses data from the Polish insurance market. All calculations are performed using the R programme.

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Alicja Wolny-Dominiak, Tomasz Żądło. 2024-08-23. WASP: Voting-based ex Ante method for Selecting joint Prediction strategy. https://arxiv.org/abs/2408.13393

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