Utility based data mining for time series analysis

Abstract

In corporate data mining applications, cost-sensitive learning is firmly established for predictive classification algorithms. Conversely, data mining methods for regression and time series analysis generally disregard economic utility and apply simple accuracy measures. Methods from statistics and computational intelligence alike minimise a symmetric statistical error, such as the sum of squared errors, to model ordinary least squares predictors. However, applications in business elucidate that real forecasting problems contain non-symmetric errors. The costs arising from over- versus underprediction are dissimilar for errors of identical magnitude, requiring an ex-post correction of the prediction to derive valid decisions. To reflect this, an asymmetric cost function is developed and employed as the objective function for neural network training, deriving superior forecasts and a cost efficient decision. Experimental results for a business scenario of inventory-levels are computed using a multilayer perceptron trained with different objective functions, evaluating the performance in competition to statistical forecasting methods.