Forecast Collapse in Time-Series Foundation Models

Abstract:When forecasting hourly returns for 1,000 US equities, we observe an unexpected phenomenon: predictions become nearly flat and show poor stock ranking, as measured by cross-sectional correlation. We call this forecast collapse. Surprisingly, the phenomenon largely disappears when forecasting trading volume under the same setting. We investigate forecast collapse across time-series foundation models (TSFMs), twelve deep-learning forecasting models, and 97 public benchmark configurations, and find that it is closely tied to target predictability. We identify two distinct reasons behind it: low predictability limits the amplitude of calibrated point forecasts, while per-series objectives leave cross-series structure unidentified. These findings reveal a calibration-ranking tradeoff: optimizing squared error leads to flat predictions, whereas directly optimizing cross-sectional correlation improves ranking but can inflate forecast amplitude by more than an order of magnitude. To address this tradeoff, we introduce CalibRank, a simple objective that balances calibration and ranking. On Finance1K, CalibRank nearly triples cross-sectional correlation while keeping amplitude close to the target, and improves correlation on all tested models. Our results reveal a blind spot in conventional time-series evaluation: per-series metrics can hide failures in cross-series structure needed by downstream decisions.

27 pages, 3 figures, 5 tables. Dataset: this https URL

Machine Learning (cs.LG); Artificial Intelligence (cs.AI); Computational Engineering, Finance, and Science (cs.CE); Applications (stat.AP); Machine Learning (stat.ML)

arXiv:2608.14106 [cs.LG]

(or arXiv:2608.14106v1 [cs.LG] for this version)

https://doi.org/10.48550/arXiv.2608.14106 arXiv-issued DOI via DataCite (pending registration)