External regressors in finnts can be entered two separate ways.
If you have an external regressor with just their historical values, finnts will only use lags of those values when creating features to use in a model. That fixes the need to know or predict what these values should be in the future. Forecasting these values into the future, either by simple methods like arima/ets or even using finnts to daisy chain forecasting regressors to then forecast the final target variable, only adds additional layers of uncertainty with the final future forecast. Using forecasts as inputs to another forecast can get out of hand quick, and is something we try to avoid within finnts.
Note: This only works for continuous (numeric) external regressors.
If you have an external regressor, with both their historical and future values, finnts will then use both current (t-0) and lag (t-n) values when creating features to use in a model. This is required for categorical regressors, but optional for continuous (numeric) regressors.
Note: Future values of external regressors need to be provided for the entire forecast horizon. Current (t-0) values of these regressors will also be used as features during the back testing process.
Below is an example of how you can set up your input_data to leverage future values of external regressors.
#> # A tibble: 15 × 6
#> Combo Date Target Holiday GDP Sales_Pipeline
#> <chr> <date> <dbl> <chr> <dbl> <dbl>
#> 1 Country_1 2020-01-01 10 New Years 5 100
#> 2 Country_1 2020-02-01 20 Valentines Day 10 110
#> 3 Country_1 2020-03-01 30 None 15 120
#> 4 Country_1 2020-04-01 40 Easter 20 130
#> 5 Country_1 2020-05-01 50 None 25 140
#> 6 Country_1 2020-06-01 60 None 30 150
#> 7 Country_1 2020-07-01 70 4th of July 35 160
#> 8 Country_1 2020-08-01 80 None 40 170
#> 9 Country_1 2020-09-01 90 Labor Day 45 180
#> 10 Country_1 2020-10-01 100 Halloween 50 190
#> 11 Country_1 2020-11-01 110 Thanksgiving 55 200
#> 12 Country_1 2020-12-01 120 Christmas 60 210
#> 13 Country_1 2021-01-01 NA New Years NA 220
#> 14 Country_1 2021-02-01 NA Valentines Day NA 230
#> 15 Country_1 2021-03-01 NA None NA 240Current and future values of “Holiday” and “Sales_Pipeline” will be used in creating the 3 month future forecast from “2021-01-01” to “2021-03-01”, while only the historical lags of “GDP” will be used to create the future forecast.