Alexander Dokumentov and Rob J Hyndman
Department of Econometrics & Business Statistics, Monash University, Australia
Abstract: We propose a new generic method ROPES (Regularized Optimization for Prediction and Estimation with Sparse data) for decomposing, smoothing and forecasting two-dimensional sparse data. In some ways, ROPES is similar to Ridge Regression, the LASSO, Principal Component Analysis (PCA) and Maximum-Margin Matrix Factorisation (MMMF). Using this new approach, we propose a practical method of forecasting mortality rates, as well as a new method for interpolating and extrapolating sparse longitudinal data. We also show how to calculate prediction intervals for the resulting estimates.