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A novel hybrid approach to forecast crude oil futures using intraday data

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  • Manickavasagam, Jeevananthan
  • Visalakshmi, S.
  • Apergis, Nicholas

Abstract

Prediction of oil prices is an implausible task due to the multifaceted nature of oil markets. This study presents two novel hybrid models to forecast WTI and Brent crude oil prices using combinations of machine learning and nature inspired algorithms. The first approach, MARSplines-IPSO-BPNN, Multivariate Adaptive Regression Splines (MARSPlines) find the important variables that affect crude oil prices. Then, the selected variables are fed into an Improved Particle Swarm Optimization (IPSO) method to obtain the best estimates of the parameters of the Backpropagation Neural Network (BPNN). Once these parameters are obtained, the variables are fed into the BPNN model to generate the required forecasts. The second approach, MARSplines-FPA-BPNN, generates the parameters of BPNN through the Flower Pollination Algorithm (FPA). The forecasting ability of these new models is compared to certain benchmark models. The findings document that the MARSplines-FPA-BPNN model performs better than the other competitive models.

Suggested Citation

  • Manickavasagam, Jeevananthan & Visalakshmi, S. & Apergis, Nicholas, 2020. "A novel hybrid approach to forecast crude oil futures using intraday data," Technological Forecasting and Social Change, Elsevier, vol. 158(C).
    • Handle: RePEc:eee:tefoso:v:158:y:2020:i:c:s0040162520309525
    DOI: 10.1016/j.techfore.2020.120126
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    2. Okhrin, Yarema & Uddin, Gazi Salah & Yahya, Muhammad, 2023. "Nonlinear and asymmetric interconnectedness of crude oil with financial and commodity markets," Energy Economics, Elsevier, vol. 125(C).
    3. Xu, Kunliang & Niu, Hongli, 2022. "Do EEMD based decomposition-ensemble models indeed improve prediction for crude oil futures prices?," Technological Forecasting and Social Change, Elsevier, vol. 184(C).
    4. Karasu, Seçkin & Altan, Aytaç, 2022. "Crude oil time series prediction model based on LSTM network with chaotic Henry gas solubility optimization," Energy, Elsevier, vol. 242(C).
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    6. Dutta, Anupam & Soytas, Ugur & Das, Debojyoti & Bhattacharyya, Asit, 2022. "In search of time-varying jumps during the turmoil periods: Evidence from crude oil futures markets," Energy Economics, Elsevier, vol. 114(C).
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    9. Oguzhan Cepni, Duc Khuong Nguyen, and Ahmet Sensoy, 2022. "News Media and Attention Spillover across Energy Markets: A Powerful Predictor of Crude Oil Futures Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).
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    More about this item

    Keywords

    Crude oil prices; Forecasting; Flower Pollination model; Machine learning model; Particle Swarm Optimization model; Intraday data;
    All these keywords.

    JEL classification:

    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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