A hybrid forecasting framework based on MCS and machine learning for higher dimensional and unbalanced systems☆

Forecasting methods and theories have been widely researched and applied in complex systems and fields such as statistical physics, econophysics, material crystals, etc. However, challenges persist in applying these methods to complex systems characterized by high dimensionality, data imbalance, and single prediction evaluation. To address these issues, we propose a novel hybrid forecasting approach that integrates the model confidence set (MCS) with machine learning (ML) models. We introduce Principal Component Analysis (PCA) to reduce dimensionality of the data, reduce data imbalance through a combination of random undersampling and oversampling, and introduce several metrics to evaluate the machine learning model set. We also introduce the MCS to select the optimal model from the set of ML models and propose a new combinatorial approach, the MCS-ML combinatorial model. An empirical study is conducted using the example of abnormal transactions in the Bitcoin blockchain. The empirical results show that the proposed MCS-ML combinatorial model has better predictive performance than the models in the ML model set under different data structures.