Multiscaled Neural Autoregressive Distributed Lag: A New Empirical Mode Decomposition Model for Nonlinear Time Series Forecasting.

Forecasting has always been the cornerstone of machine learning and statistics. Despite the great evolution of the time series theory, forecasters are still in the hunt for better models to make more accurate decisions. The huge advances in neural networks over the last years has led to the emergence of a new generation of effective models replacing classic econometric models. It is in this direction that we propose, in this paper, a new multiscaled Feedforward Neural Network (FNN), with the aim of forecasting multivariate time series. This new model, called Empirical Mode Decomposition (EMD)-based Neural ARDL, is inspired from the well-known Autoregressive Distributed Lag (ARDL) model being our proposal founded upon the concepts of nonlinearity, EMD-multiresolution and neural networks. These features give the model the ability to effectively capture many nonlinear patterns like the ones often present in econophysical time series, such as nonlinear trends, seasonal effects, long-range dependency, etc. The proposed algorithm can be summarized into the following four basic tasks: (i) EMD breaking-down multivariate time series into different resolution levels, (ii) feeding EMD components from the same levels into a number of feedforward neural ARDL models, (iii) from one level to the next, extrapolating the component corresponding to the response variable (scalar output) a number of steps ahead, and finally, (iv) recombining level-by-level forecasts into a single output. An optimal learning scheme is rigorously designed for efficiently training the new proposed architecture. The approach is finally tested and compared to a number of powerful benchmark models, where experiments are conducted on real-world data.