Climate change and crude oil prices: An interval forecast model with interval-valued textual data

Zishu Cheng, Mingchen Li, Yuying Sun, Yongmiao Hong and Shouyang Wang

Energy Economics, 2024, vol. 134, issue C

Abstract: Climate change compels the development and enforcement of policies and regulations designed to diminish carbon emissions, imposing substantial implications on the energy sector. Given the contribution of crude oil prices to carbon emissions, developing precise forecasting methods is imperative. However, existing studies often overlook the inherent uncertainty in price movements by focusing solely on point forecasting. To address this limitation, this paper constructs a threshold autoregressive interval-valued model with interval sentiment indexes for climate change (TARIX) to analyze and forecast interval-valued crude oil prices. We have found that the interval climate sentiment index, derived from social media, can significantly enhance the accuracy in forecasting interval crude oil prices. Moreover, we propose an interval-based trading strategy that can effectively reduce volatility and enhance returns. Our empirical results demonstrate that our interval-valued forecast model outperforms traditional forecasting methods in terms of forecasting accuracy and profit generation.

Keywords: Crude oil future price; Interval time series; Textual analysis; Trading strategy (search for similar items in EconPapers)
JEL-codes: C13 C2 Q4 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:134:y:2024:i:c:s0140988324003207

DOI: 10.1016/j.eneco.2024.107612

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