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Dr. León-Castro, Ernesto
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Forecasting the exchange rate with multiple linear regression and heavy ordered weighted average operators
2022, Dr. León-Castro, Ernesto, Flores-Sosa, Martha, Merigó, José, Yager, Ronald
This paper introduces the multiple linear regression heavy ordered weighted average (MLR-HOWA) operator. On the MLR-HOWA operator, the beta values are obtained with the use of the HOWA means. In that sense, it provides a new range of possibilities by under or overestimating the result based on the decision maker’s expectations and knowledge. Therefore, the MLR-HOWA provides a forecasting tool that can analyze multiple scenarios from minimum to maximum. The main properties and two extensions using induced and generalized variables are also presented. An application in exchange rate forecasting based on inflation and interest rate as independent variables for five Latin American countries is submitted. Among the main results, it is possible to identify that the forecasting error is reduced when different combinations of MLR with OWA operators are done.