Selection of Machine Learning Models for Oil Price Forecasting: Based on the Dual Attributes of Oil

Lei Yan, Yuting Zhu, Haiyan Wang and Daqing Gong

Discrete Dynamics in Nature and Society, 2021, vol. 2021, 1-16

Abstract: Since the commodity and financial attributes of crude oil will have a long-term or short-term impact on crude oil prices, we propose a de-dimension machine learning model approach to forecast the international crude oil prices. First, we use principal component analysis (PCA), multidimensional scale (MDS), and locally linear embedding (LLE) methods to reduce the dimensions of the data. Then, based on the recurrent neural network (RNN) and long-term and short-term memory (LSTM) models, we build eight models for predicting the future and spot prices of international crude oil. From the analysis and comparison of the prediction results, we find that reducing the dimension of the data can improve the accuracy of the model and the applicability of RNN and LSTM models. In addition, the LLE-RNN/LSTM models can most successfully capture the nonlinear characteristics of crude oil prices. When the moving window size is twenty, that is, when crude oil price data are lagging by almost a month, each model can minimize its error, and the LLE-RNN /LSTM models have the best robustness.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:hin:jnddns:1566093

DOI: 10.1155/2021/1566093

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