Are there gains from pooling real-time oil price forecasts?

Christiane Baumeister, Lutz Kilian and Thomas K. Lee

Energy Economics, 2014, vol. 46, issue S1, S33-S43

Abstract: The answer depends on the objective. The approach of combining five of the leading forecasting models with equal weights dominates the strategy of selecting one model and using it for all horizons up to two years. Even more accurate forecasts, however, are obtained when allowing the forecast combinations to vary across forecast horizons. While the latter approach is not always more accurate than selecting the single most accurate forecasting model by horizon, its accuracy can be shown to be much more stable over time. The MSPE of real-time pooled forecasts is between 3% and 29% lower than that of the no-change forecast and its directional accuracy as high as 73%. Our results are robust to alternative oil price measures and apply to monthly as well as quarterly forecasts. We illustrate how forecast pooling may be used to produce real-time forecasts of the real and the nominal price of oil in a format consistent with that employed by the U.S. Energy Information Administration in releasing its short-term oil price forecasts, and we compare these forecasts during key historical episodes.

Keywords: Forecast combination; Real-time data; WTI; Refiners' acquisition cost; Model selection (search for similar items in EconPapers)
JEL-codes: C53 Q43 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (73)

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Working Paper: Are There Gains from Pooling Real-Time Oil Price Forecasts? (2014)
Working Paper: Are there Gains from Pooling Real-Time Oil Price Forecasts? (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:46:y:2014:i:s1:p:s33-s43

DOI: 10.1016/j.eneco.2014.08.008

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