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Forecasting crude oil and natural gas spot prices by classification methods

  • Viviana Fernández

    ()

In this article, we forecast crude oil and natural gas spot prices at a daily frequency based on two classification techniques: artificial neural networks (ANN) and support vector machines (SVM). As a benchmark, we utilize an autoregressive integrated moving average (ARIMA) specification. We evaluate out-of-sample forecast based on encompassing tests and mean-squared prediction error (MSPE). We find that at short-time horizons (e.g., 2-4 days), ARIMA tends to outperform both ANN and SVM. However, at longer-time horizons (e.g., 10-20 days), we find that in general ARIMA is encompassed by these two methods, and linear combinations of ANN and SVM forecasts are more accurate than the corresponding individual forecasts. Based on MSPE calculations, we reach similar conclusions: the two classification methods under consideration outperform ARIMA at longer time horizons.

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File URL: http://www.dii.uchile.cl/~cea/sitedev/cea/www/download.php?file=documentos_trabajo/ASOCFILE120061128105820.pdf
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Paper provided by Centro de Economía Aplicada, Universidad de Chile in its series Documentos de Trabajo with number 229.

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Date of creation: 2006
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Handle: RePEc:edj:ceauch:229
Contact details of provider: Web page: http://www.dii.uchile.cl/cea/

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  1. Francis X. Diebold, 1997. "The Past, Present, and Future of Macroeconomic Forecasting," NBER Working Papers 6290, National Bureau of Economic Research, Inc.
  2. Dooley, Gillian & Lenihan, Helena, 2005. "An assessment of time series methods in metal price forecasting," Resources Policy, Elsevier, vol. 30(3), pages 208-217, September.
  3. Lanza, Alessandro & Manera, Matteo & Giovannini, Massimo, 2005. "Modeling and forecasting cointegrated relationships among heavy oil and product prices," Energy Economics, Elsevier, vol. 27(6), pages 831-848, November.
  4. Morana, Claudio, 2001. "A semiparametric approach to short-term oil price forecasting," Energy Economics, Elsevier, vol. 23(3), pages 325-338, May.
  5. Diebold, Francis X & Mariano, Roberto S, 2002. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 134-44, January.
  6. repec:cup:cbooks:9780521634809 is not listed on IDEAS
  7. Tay, Francis E. H. & Cao, Lijuan, 2001. "Application of support vector machines in financial time series forecasting," Omega, Elsevier, vol. 29(4), pages 309-317, August.
  8. Fang, Yue, 2003. "Forecasting combination and encompassing tests," International Journal of Forecasting, Elsevier, vol. 19(1), pages 87-94.
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