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A new probability forecasting model for cotton yarn futures price volatility with explainable AI and big data

Huosong Xia, Xiaoyu Hou, Justin Zuopeng Zhang Orcid Logo, Mohammad Abedin

Journal of Forecasting

Swansea University Author: Mohammad Abedin

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DOI (Published version): 10.1002/for.3185

Abstract

Cotton, cotton yarn, and other cotton products have frequent price volatility, increasing the difficulty for industry participants to develop rational business decision plans. To support cotton textile industry decision-makers, we apply data mining methods to extract the main influencing factors aff...

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Published in: Journal of Forecasting
ISSN: 0277-6693 1099-131X
Published: Wiley 2024
Online Access: Check full text

URI: https://cronfa.swan.ac.uk/Record/cronfa67179
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Abstract: Cotton, cotton yarn, and other cotton products have frequent price volatility, increasing the difficulty for industry participants to develop rational business decision plans. To support cotton textile industry decision-makers, we apply data mining methods to extract the main influencing factors affecting cotton yarn futures prices from big data and build a probabilistic forecasting model for cotton yarn price volatility with uncertainty assessment. Based on Explainable Artificial Intelligence (XAI) and data-driven perspectives, we use the LassoNet algorithm to extract 18 features most relevant to the target variable from the massive data and visualize the importance values of the selected features to improve the reliability. Moreover, by combining conformal forecasting (CP) with quantile regression (QR), the uncertainty measure of the point estimation results of the long and short-term memory (LSTM) model is applied to improve the application value of the model. Finally, SHAP (SHapley Additive exPlanations) is introduced to analyze the SHAP values of the input features on the output results and to explore in depth the interaction and mechanism of action between the input features and the target variables to improve the explainability of the model. Our model provides a “big data-forecasting model-decision support” decision paradigm for real-world problems.
College: Faculty of Humanities and Social Sciences
Funders: Swansea University; National Natural Science Foundation of China - 72171184

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