Forecasting Commodity Prices: Looking for a Benchmark
Marek Kwas () and
Michał Rubaszek ()
Additional contact information
Marek Kwas: Collegium of Economic Analysis, SGH Warsaw School of Economics, 02-554 Warsaw, Poland
Forecasting, 2021, vol. 3, issue 2, 1-13
The random walk, no-change forecast is a customary benchmark in the literature on forecasting commodity prices. We challenge this custom by examining whether alternative models are more suited for this purpose. Based on a literature review and the results of two out-of-sample forecasting experiments, we draw two conclusions. First, in forecasting nominal commodity prices at shorter horizons, the random walk benchmark should be supplemented by futures-based forecasts. Second, in forecasting real commodity prices, the random walk benchmark should be supplemented, if not substituted, by forecasts from the local projection models. In both cases, the alternative benchmarks deliver forecasts of comparable and, in many cases, of superior accuracy.
Keywords: commodity prices; commodity futures; mean-reversion; local projection; forecasting (search for similar items in EconPapers)
JEL-codes: A1 B4 C0 C1 C2 C3 C4 C5 C8 M0 Q2 Q3 Q4 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:gam:jforec:v:3:y:2021:i:2:p:27-459:d:577877
Access Statistics for this article
Forecasting is currently edited by Prof. Dr. Sonia Leva
More articles in Forecasting from MDPI, Open Access Journal
Bibliographic data for series maintained by XML Conversion Team ().