The Forecasting & Futurism Section is sponsoring its second annual forecasting competition for members of the section only. The competition winner will receive an iPad2 (or the cash equivalent if there are delivery issues).
Competition Description
The person who develops the most accurate model that predicts the Civilian Unemployment Rate (UNRATE), measured on a monthly basis, from March-end 2012 through September-end 2012 wins! Entrants may use any combination of actuarial techniques to arrive at the model, including but not limited to: time series, regression, genetic algorithms, agent based models, and judgmental forecasting.
The data source will be the Federal Reserve Economic Data (FRED) database, which can be found at: research.stlouisfed.org/fred2/. The statistic of interest will be the tracking error for each of the submitted models, defined as the sum of the (seven) squared monthly deviations between the forecast and the actual UNRATE data points over the forecast period. All input variables into the model must also come from the FRED database (except for time variables, mathematical operators and constants). The only exception is that data series that have some form of unemployment included in them (i.e. state unemployment or jobless claims) are not allowed. It is recommended that each of the variables included is measured at least on a monthly basis. Quarterly reported variables are allowed, but will use the quarterly statistic for the next three months. All data will be cut off as of October 12, 2012. Any September data not reported by that date will be replaced with August data.
Competition Entries
- All entries must be submitted no later than February 28, 2012 to Christy Cook at ccook@soa.org. An individual can submit more than one model. Entrants should verify Forecasting & Futurism Section membership status on the online Directory.
- A sample model submission may look like this:
Y= Y(t-1) + a * CPI for all urban consumers(t-1) + b * 10Y Treasury Rate(t-1)/ FED Funds(t-1) + c * log (Y(t-1) / Y(t-2) ) ; Where a, b, c are constants.
- In addition to the model, all entrants should provide a short description of how the model was developed.
For more information on the different classes of forecasting methods, refer to the article in the September 2009 issue of the Forecasting & Futurism newsletter. There is a list of five main categories that can be used with other techniques (such as genetic algorithms).
- Extrapolative methods—Methods based on data patterns rather than explanatory variables.
- Explanatory variable methods—Methods incorporating causal variables to forecast dependent variables.
- Simulation modeling methods—Methods using the computer to simulate real-world agents, behaviors and events.
- Judgmental methods—Methods based on expert opinion or intuition.
- Composite methods—A combination of the above.
Many of the forecasting methods in the above categories are very powerful, yet not frequently used by actuaries. Some of them are exponential smoothing, autoregressive moving average, econometric modeling, system dynamics simulation and multi-agent simulation. This may be a great time to get to practice one of these methods, and think about how it could apply to our profession. On the other hand, a tried-and-true method may be the best way to go.
Recognition
The competition winner will be announced at the 2012 SOA Annual Meeting (attendance at the annual meeting is not required to win). In the event of a tie, the Forecasting & Futurism Section Council will use the best or most innovative description of the model to decide the winner of the iPad2. During the course of the contest, there will be a periodic update on the frontrunners via blast email to the Forecasting & Futurism Section membership.
Rules
The Forecasting & Futurism Section Council reserves the right not to award any prize in the event all models are wide of the mark.
The Forecasting & Futurism Section and the Society of Actuaries may choose to use information about any of the models submitted in publications or other venues of the SOA without further involvement of the entrant.
The competition winner is responsible for taxation issues as they are appropriate to his/her region.
If you have any questions on the contest rules, feel free to contact Ben Wadsley at Ben.Wadsley@transamerica.com.