Monitoring and Adaptation in Bayesian Forecasting Models

Practical aspects of a new technique for monitoring and controlling the predictive performance of Bayesian forecasting models are discussed. The basic features of the approach to model monitoring introduced in a general setting in West (1986) are described and extended to a wide class of dynamic, nonnormal, and nonlinear Bayesian forecasting models. An associated method of automatically detecting and rejecting outliers and adapting models to abrupt structural changes in the time series is also discussed. The resulting forecast monitoring and control scheme is simply constructed and applied and is illustrated in two applications.