Uncovering predictability in the evolution of the WTI oil futures curve

Fearghal Kearney and Han Lin Shang

European Financial Management, 2020, vol. 26, issue 1, 238-257

Abstract: Accurately forecasting the price of oil, the world's most actively traded commodity, is of great importance to both academics and practitioners. We contribute by proposing a functional time series based method to model and forecast oil futures. Our approach boasts a number of theoretical and practical advantages, including effectively exploiting underlying process dynamics missed by classical discrete approaches. We evaluate the finite‐sample performance against established benchmarks using a model confidence set test. A realistic out‐of‐sample exercise provides strong support for the adoption of our approach, which resides in the superior set of models in all considered instances.

Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:bla:eufman:v:26:y:2020:i:1:p:238-257

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