Forecasting the Real Price of Oil in a Changing World
A Forecast Combination Approach
Bibliographic Data
| ID | 19418403 |
|---|---|
| Authors | Christiane Baumeister (0000-0003-3715-7119, Bank of Canada), Lutz Kilian (University of Michigan) |
| Year | 2015 |
| Volume | 33 |
| Issue | 3 |
| Pages | 338-351 |
| Publication date | 2015-07-03 |
| Peer Reviewed | Yes |
| Open Access | No |
| Type | ARTICLE |
| Venue | Journal of Business and Economic Statistics (JOURNAL) |
| Journal identifiers | ISSN: 0735-0015 • E-ISSN: 1537-2707 |
| Publisher | Informa UK Limited (PUBLISHER • GB) |
| DOI | 10.1080/07350015.2014.949342 |
| OpenAlex | W2099954488 |
| Language | EN |
| Citations received | 8 |
| References cited | 21 |
The U.S. Energy Information Administration (EIA) regularly publishes monthly and quarterly forecasts of the price of crude oil for horizons up to 2 years, which are widely used by practitioners. Traditionally, such out-of-sample forecasts have been largely judgmental, making them difficult to replicate and justify. An alternative is the use of real-time econometric oil price forecasting models. We investigate the merits of constructing combinations of six such models. Forecast combinations have received little attention in the oil price forecasting literature to date. We demonstrate that over the last 20 years suitably constructed real-time forecast combinations would have been systematically more accurate than the no-change forecast at horizons up to 6 quarters or 18 months. The MSPE reductions may be as high as 12% and directional accuracy as high as 72%. The gains in accuracy are robust over time. In contrast, the EIA oil price forecasts not only tend to be less accurate than no-change forecasts, but are much less accurate than our preferred forecast combination. Moreover, including EIA forecasts in the forecast combination systematically lowers the accuracy of the combination forecast. We conclude that suitably constructed forecast combinations should replace traditional judgmental forecasts of the price of oil
Consensus forecast · Crude oil · Econometrics · Economics · Forecast error · Forecast verification · Oil price · Replicate · Statistics · Computer Science · Energy, Environment, and Transportation Policies · Engineering · Market Dynamics and Volatility · Mathematics · Monetary Policy and Economic Impact
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| Unique citing works | 8 |
|---|---|
| Citations per year | 0,8 |
| Citation span | 2016 - 2025 (10) |
| Citation velocity | recent |
| Highly cited | No |
| Citation types | Neutral: 8 |