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Forecasting Volatility Returns of Oil Price Using Gene Expression Programming Approach

Author

Listed:
  • Amo Baffour Alexander
  • Feng Jingchun
  • Fan Liwei

    (School of Business, Hohai University, 8 West Fochenglu, Nanjing211100, China)

  • Buanya Beryl Adormaa

    (College of Environment, Hohai University, Nanjing211100, China)

Abstract

This study employs four (4) Generalized Autoregressive Conditional Heteroscedasticity (GARCH) variants namely GARCH (1, 1), Glosten–Jagannathan–Runkle (GJR), Auto Regressive Integrated Moving Average (ARIMA)-GARCH and ARIMA-GJR as benchmark models to assess the performance of a proposed novel Gene Expression Programming (GEP) based univariate time series modeling approach used to conduct ex ante oil price volatility forecasts. The report illustrates that the GEP model is more superior to any of the traditional models on issues relating to both loss functions applied. The GEP model is of a greater volatility forecasting precision at different forecast horizons, therefore. There is also the existence of evidence that GJR and ARIMA-GJR differ in their loss functions, the performance is nevertheless better than GARCH (1, 1) and ARIMA-GARCH. This study conducted herein achieves importance in literature by broadening the application of gene algorithms in finance and forecasting. It also solves the problem of high error associated with the use of GARCH related models in oil price volatility forecasting.

Suggested Citation

  • Amo Baffour Alexander & Feng Jingchun & Fan Liwei & Buanya Beryl Adormaa, 2019. "Forecasting Volatility Returns of Oil Price Using Gene Expression Programming Approach," Journal of Time Series Econometrics, De Gruyter, vol. 11(2), pages 1-16, July.
    • Handle: RePEc:bpj:jtsmet:v:11:y:2019:i:2:p:16:n:2
    DOI: 10.1515/jtse-2017-0022
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