Comparative analysis of ARIMA and LSTM for predicting fluctuating time series data

Abstract

The investigation of time series data forecasting is a critical topic within the realms of economics and business. The autoregressive integrated moving average (ARIMA) model has been prevalently utilized, notwithstanding its limitations, which include the necessity for a substantial quantity of data points and the presumption of data linearity. However, with recent developments, the long short-term memory (LSTM) network has emerged as a promising alternative, potentially overcoming these limitations. The objective of this study is to determine an effective approach for managing time series data characterized by volatility and missing values. Evaluation was conducted using RMSE for accuracy assessment, and the execution time measured using the Python Timeit library. The findings indicates that in a dataset comprising 60 data points, the LSTM model (RMSE 0.037618) surpasses the ARIMA model (RMSE 0.062667) in terms of accuracy. However, this trend reverses in a larger dataset of 228 data points, where the ARIMA model demonstrates superior accuracy (RMSE 0.006949) compared to the LSTM model (RMSE 0.036025). In scenarios with missing data, the LSTM model consistently outperforms the ARIMA model, although the accuracy of both models diminishes with an increase in the number of missing values. The ARIMA model significantly outpaces the LSTM model.