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Decoding Futures Price Dynamics: A Regularized Sparse Autoencoder for Interpretable Multi-Horizon Forecasting and Factor Discovery

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  • Gupta, Abhijit

Abstract

Commodity futures price volatility creates significant economic challenges, necessitating accurate multi-horizon forecasting. Predicting these prices is complicated by diverse interacting factors (macroeconomic, supply/demand, geopolitical). Current models often lack transparency, limiting strategic use. This paper presents a Regularized Sparse Autoencoder (RSAE), a deep learning framework for simultaneous multi-horizon commodity futures prediction and discovery of interpretable latent market drivers. The RSAE forecasts prices at multiple horizons (e.g., 1-day, 1-week, 1-month) using multivariate time series. A key L1 regularization on its latent vector enforces sparsity, promoting parsimonious explanations of market dynamics through learned factors representing underlying drivers (e.g., demand shifts, supply shocks). Drawing from energy-based models and sparse coding, the RSAE optimizes predictive accuracy while learning sparse representations. Evaluated on historical Copper and Crude Oil futures data with numerous indicators, our findings suggest the RSAE offers competitive multi-horizon forecasting accuracy and data-driven insights into price dynamics via its interpretable latent space, a notable advantage over traditional black-box approaches.

Suggested Citation

  • Gupta, Abhijit, 2025. "Decoding Futures Price Dynamics: A Regularized Sparse Autoencoder for Interpretable Multi-Horizon Forecasting and Factor Discovery," OSF Preprints 4rzky_v1, Center for Open Science.
  • Handle: RePEc:osf:osfxxx:4rzky_v1
    DOI: 10.31219/osf.io/4rzky_v1
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