Regularizing holidays

The process of constraining a model’s flexibility to help it generalize better to new data is called regularization. Chapter 5, Working with Seasonality, featured a lengthy discussion about regularizing the effect of seasonality in Prophet. The mathematical procedure under Prophet’s hood is the same when regularizing both holiday and seasonality effects, so we can use the same concepts from the seasonality chapter and apply them to holidays.

In general, if you, as the analyst, find that your holidays have more control over your model than you expected, that is, if their absolute magnitudes are higher than you believe is accurate or necessary to model your problem, then you’ll want to consider regularization. Regularization will simply compress the magnitude of your holiday effects and forbid them from having as large an effect as they would otherwise. Prophet contains a holidays_prior_scale parameter to control this.

This is the same...