EconPapers    
Economics at your fingertips  
 

Convolutional neural network forecasting of European Union allowances futures using a novel unconstrained transformation method

Wenyang Huang, Huiwen Wang, Haotong Qin, Yigang Wei and Julien Chevallier

Energy Economics, 2022, vol. 110, issue C

Abstract: This paper develops an open-high-low-close (OHLC) data forecasting framework to forecast EUA futures price based on EU ETS data and extended exogenous variables from 2013 to 2020. The challenge of forecasting such an OHLC structure lies in handling its three intrinsic constraints, i.e., the positive constraint, interval constraint, and boundary constraint. This paper proposes a novel unconstrained transformation method for OHLC data and combines it with various forecasting models. Out-of-sample modelings identify the extraordinary performance of the convolutional neural network (CNN) in terms of MAPE (1.371%), MAE (0.274), RMSE (0.370), and AR (0.621), better than that of multiple linear regression (MLR), vector auto-regression (VAR) and vector error correction model (VECM), support vector regression (SVR), and multi-layer perceptron (MLP). The proposed transformation-based forecasting framework demonstrates the considerable potential for OHLC data forecasting in the energy finance field, e.g., crude and natural gas. Practicable and concrete suggestions are provided to ensure the profitability of trading EUA futures.

Keywords: OHLC data; Trading strategies; EUA; CNN; Unconstrained transformation (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988322002171
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:110:y:2022:i:c:s0140988322002171

DOI: 10.1016/j.eneco.2022.106049

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2024-02-12
Handle: RePEc:eee:eneeco:v:110:y:2022:i:c:s0140988322002171