A decomposition clustering ensemble learning approach for forecasting foreign exchange rates |
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| Institution: | Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing, 100190, China;Center for Forecasting Science, Chinese Academy of Sciences, Beijing, 100190, China;Department of Information Systems, City University of Hong Kong, Tat Chee Avenue, Kowloon, Hong Kong China;Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing, 100190, China;School of Economics and Management, University of Chinese Academy of Sciences, Beijing, 100190, China;School of Data Science, City University of Hong Kong, Tat Chee Avenue, Kowloon, Hong Kong, China;Department of Information Systems, City University of Hong Kong, Tat Chee Avenue, Kowloon, Hong Kong China;Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing, 100190, China;School of Economics and Management, University of Chinese Academy of Sciences, Beijing, 100190, China;Department of Management Sciences, City University of Hong Kong Tat Chee Avenue, Kowloon, Hong Kong, China;International Business School Shaanxi Normal University, Xi'an, 710119, China;Department of Industrial and Manufacturing Systems Engineering, Hong Kong University, Hong Kong, China |
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| Abstract: | A decomposition clustering ensemble (DCE) learning approach is proposed for forecasting foreign exchange rates by integrating the variational mode decomposition (VMD), the self-organizing map (SOM) network, and the kernel extreme learning machine (KELM). First, the exchange rate time series is decomposed into N subcomponents by the VMD method. Second, each subcomponent series is modeled by the KELM. Third, the SOM neural network is introduced to cluster the subcomponent forecasting results of the in-sample dataset to obtain cluster centers. Finally, each cluster's ensemble weight is estimated by another KELM, and the final forecasting results are obtained by the corresponding clusters' ensemble weights. The empirical results illustrate that our proposed DCE learning approach can significantly improve forecasting performance, and statistically outperform some other benchmark models in directional and level forecasting accuracy. |
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| Keywords: | Exchange rates forecasting Variational mode decomposition Kernel extreme learning machine Self-organizing map Decomposition ensemble learning |
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