DETECTING VOLCANIC ERUPTIONS IN TEMPERATURE RECONSTRUCTIONS BY DESIGNED BREAK-INDICATOR SATURATION
We present a methodology for detecting breaks at any point in time-series regression models using an indicator saturation approach, applied here to modelling climate change. Building on recent developments in econometric model selection for more variables than observations, we saturate a regression model with a full set of designed break functions. By selecting over these break functions using an extended general-to-specific algorithm, we obtain unbiased estimates of the break date and magnitude. Monte Carlo simulations confirm the approximate properties of the approach. We assess the methodology by detecting volcanic eruptions in a time series of Northern Hemisphere mean temperature spanni…
Forecasting : theory and practice
Forecasting has always been at the forefront of decision making and planning. The uncertainty that surrounds the future is both exciting and challenging, with individuals and organisations seeking to minimise risks and maximise utilities. The large number of forecasting applications calls for a diverse set of forecasting methods to tackle real-life challenges. This article provides a non-systematic review of the theory and the practice of forecasting. We provide an overview of a wide range of theoretical, state-of-the-art models, methods, principles, and approaches to prepare, produce, organise, and evaluate forecasts. We then demonstrate how such theoretical concepts are applied in a varie…