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Forecasting the price of crude oil via convenience yield predictions

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Author Info
Thomas A. Knetsch (Economics Department, Deutsche Bundesbank, Frankfurt am Main, Germany)

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Abstract

The paper develops an oil price forecasting technique which is based on the present value model of rational commodity pricing. The approach suggests shifting the forecasting problem to the marginal convenience yield, which can be derived from the cost-of-carry relationship. In a recursive out-of-sample analysis, forecast accuracy at horizons within one year is checked by the root mean squared error as well as the mean error and the frequency of a correct direction-of-change prediction. For all criteria employed, the proposed forecasting tool outperforms the approach of using futures prices as direct predictors of future spot prices. Vis-à-vis the random-walk model, it does not significantly improve forecast accuracy but provides valuable statements on the direction of change. Copyright © 2007 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/for.1040
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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Journal of Forecasting.

Volume (Year): 26 (2007)
Issue (Month): 7 ()
Pages: 527-549
Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Handle: RePEc:jof:jforec:v:26:y:2007:i:7:p:527-549

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/2966

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. von Kalckreuth, Ulf, 2005. "A “wreckers theory” of financial distress," Discussion Paper Series 1: Economic Studies 2005,40, Deutsche Bundesbank, Research Centre. [Downloadable!]
  2. Döpke, Jörg & Dovern, Jonas & Fritsche, Ulrich & Slacalek, Jirka, 2005. "European inflation expectations dynamics," Discussion Paper Series 1: Economic Studies 2005,37, Deutsche Bundesbank, Research Centre. [Downloadable!]
  3. Campbell, John Y. & Hilscher, Jens & Szilagyi, Jan, 2005. "In search of distress risk," Discussion Paper Series 1: Economic Studies 2005,27, Deutsche Bundesbank, Research Centre. [Downloadable!]
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  4. Koetter, Michael & Bos, Jaap W. B. & Heid, Frank & Kool, Clemens J. M. & Kolari, James W. & Porath, Daniel, 2005. "Accounting for distress in bank mergers," Discussion Paper Series 2: Banking and Financial Studies 2005,09, Deutsche Bundesbank, Research Centre. [Downloadable!]
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