Exogenous Data in Forecasting: FARM -- A New Measure for Relevance Evaluation

Abstract

Evaluating the relevance of an exogenous data series is the first step in improving the prediction capabilities of a forecast algorithm. Inspired by existing metrics for time series similarity, we introduce a new approach named FARM - Forward Aligned Relevance Metric. Our forward method relies on an angular measure that compares changes in subsequent data points to align time-warped series in an efficient way. The proposed algorithm combines local and global measures to provide a balanced relevance metric. This results in considering also partial, intermediate matches as relevant indicators for exogenous data series significance. As a first validation step, we present the application of our FARM approach to synthetic but representative signals. While demonstrating the improved capabilities with respect to existing approaches, we also discuss existing constraints and limitations of our idea.