Bayesian forecasts in markets with overlapping structures

This paper defines a new class of multivariate state space models which combine the power steady model of Smith with models of Queen and Smith and Queen and can be used to forecast time series of shares in markets which have overlapping structures. Although these models as yet cannot accommodate all possible overlapping structures, they do provide an initial attempt to integrate market information directly into the forecasting process. It is shown how the market structure can be represented by a graph, which not only provides a useful pictorial representation of the structure, but can also play an important part in defining the new model.