VARX Lasso forecasting model: how it works

VARX Lasso

Lasso, Least Absolute Shrinkage and Selection Operator is the most successful application of AI within econometrics. Lasso was introduced in order to improve the prediction accuracy and interpretability of regression models by altering the model fitting process to select only a subset of the provided independent variables for use in the final model rather than using all of them. Lasso forces certain coefficients to be set to zero, effectively choosing a simpler model that does not include those coefficients.

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Indicio tests this model on your history next to 80+ others, at every horizon, and keeps the ones that forecast best. With leading indicators chosen for you from over 400 million series, and every number explained.

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