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Predicting tanker freight rates using parsimonious variables and a hybrid artificial neural network with an adaptive genetic algorithm

Author

Listed:
  • Payman Eslami

    (School of Industrial Engineering, University of Ulsan)

  • Kihyo Jung

    (School of Industrial Engineering, University of Ulsan)

  • Daewon Lee

    (School of Industrial Engineering, University of Ulsan)

  • Amir Tjolleng

    (School of Industrial Engineering, University of Ulsan)

Abstract

Short-term prediction of tanker freight rates (TFRs) is strategically important to stakeholders in the oil shipping industry. This study develops a hybrid TFR prediction model based on an artificial neural network (ANN) and an adaptive genetic algorithm (AGA). The AGA adaptively searches satisficing network parameters such as input delay size. The ANN iteratively optimizes a prediction network considering parsimonious variables and time-lag effects as predictors. Three parsimonious variables (crude oil price, fleet productivity and bunker price) are selected by a stepwise regression of TFR variables. The article compares the performance of its hybrid model with two traditional approaches (regression and moving average), as well as with the findings of existing ANN studies. The results of our model (root mean squared error (RMSE)=11.2 WS) are not only significantly superior to the regression approach (RMSE=21.6 WS) and the moving average approach (RMSE=17.5 WS), but are even slightly superior to the results of existing ANN studies (RMSE=14.6 WS–15.8 WS).

Suggested Citation

  • Payman Eslami & Kihyo Jung & Daewon Lee & Amir Tjolleng, 2017. "Predicting tanker freight rates using parsimonious variables and a hybrid artificial neural network with an adaptive genetic algorithm," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 19(3), pages 538-550, August.
    • Handle: RePEc:pal:marecl:v:19:y:2017:i:3:d:10.1057_mel.2016.1
    DOI: 10.1057/mel.2016.1
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