Real-Time Forecasting of Online Auctions via Functional K-Nearest Neighbors

32 Pages Posted: 12 Jul 2009

See all articles by Shu Zhang

Shu Zhang

University of Maryland - College Park

Wolfgang Jank

University of Maryland - Decision and Information Technologies Department

Galit Shmueli

Institute of Service Science, National Tsing Hua University, Taiwan

Date Written: July 9, 2009

Abstract

Forecasting the price in online auctions is important for buyers and sellers. With good forecasts, bidders can make informed bidding decisions and sellers can select the right time and place to list their products. While information from other auctions can help forecast an ongoing auction, it should be weighted by its relevance to the auction of interest. We propose a novel functional K-nearest neighbor (fKNN) forecaster for real-time forecasting of online auctions. The forecaster uses information from other auctions and weighs their contribution by their relevance in terms of auction, seller and product features, and by similarity of the price paths. We capture an auction's price path borrowing ideas from functional data analysis. We propose a novel Beta growth model, and then measure distances between two price paths via the Kullback-Leibler distance. Our resulting fKNN forecaster incorporates a mixture of functional and non-functional distances. We apply the forecaster to several large datasets of eBay auctions, showing improved predictive performance over several competing models. We also investigate performance across various levels of data heterogeneity, finding that fKNN is particularly effective for forecasting heterogeneous auction populations.

Keywords: eBay, functional forecasting, functional data, Kullback-Leibler distance, Beta distribution, dynamics

JEL Classification: C49

Suggested Citation

Zhang, Shu and Jank, Wolfgang and Shmueli, Galit, Real-Time Forecasting of Online Auctions via Functional K-Nearest Neighbors (July 9, 2009). Available at SSRN: https://ssrn.com/abstract=1432122 or http://dx.doi.org/10.2139/ssrn.1432122

Shu Zhang

University of Maryland - College Park ( email )

College Park, MD 20742
United States

Wolfgang Jank (Contact Author)

University of Maryland - Decision and Information Technologies Department ( email )

Robert H. Smith School of Business
4300 Van Munching Hall
College Park, MD 20742
United States
301-405-1118 (Phone)

HOME PAGE: http://www.smith.umd.edu/faculty/wjank/

Galit Shmueli

Institute of Service Science, National Tsing Hua University, Taiwan ( email )

Hsinchu, 30013
Taiwan

HOME PAGE: http://www.iss.nthu.edu.tw

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