Forecasting commodity prices: empirical evidence using deep learning tools

Hachmi Ben Ameur (), Sahbi Boubaker, Zied Ftiti, Wael Louhichi and Kais Tissaoui
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Hachmi Ben Ameur: Omnes Education
Sahbi Boubaker: College of Computer Science and Engineering, University of Jeddah
Zied Ftiti: EDC Paris Business School
Wael Louhichi: ESSCA School of Management
Kais Tissaoui: University of Ha’il, Applied College

Annals of Operations Research, 2024, vol. 339, issue 1, No 14, 349-367

Abstract: Abstract Since the last two decades, financial markets have exhibited several transformations owing to recurring crises episodes that has led to the development of alternative assets. Particularly, the commodity market has attracted attention from investors and hedgers. However, the operational research stream has also developed substantially based on the growth of the artificial intelligence field, which includes machine learning and deep learning. The choice of algorithms in both machine learning and deep learning is case-sensitive. Hence, AI practitioners should first attempt solutions related to machine learning algorithms, and if such solutions are unsatisfactory, they must apply deep learning algorithms. Using this perspective, this study aims to investigate the potential of various deep learning basic algorithms for forecasting selected commodity prices. Formally, we use the Bloomberg Commodity Index (noted by the Global Aggregate Index) and its five component indices: Bloomberg Agriculture Subindex, Bloomberg Precious Metals Subindex, Bloomberg Livestock Subindex, Bloomberg Industrial Metals Subindex, and Bloomberg Energy Subindex. Based on daily data from January 2002 (the beginning wave of commodity markets' financialization) to December 2020, results show the effectiveness of the Long Short-Term Memory method as a forecasting tool and the superiority of the Bloomberg Livestock Subindex and Bloomberg Industrial Metals Subindex for assessing other commodities' indices. These findings is important in term for investors in term of risk management as well as policymakers in adjusting public policy, especially during Russian-Ukrainian war.

Keywords: Commodity markets; Forecasting; Deep learning; Bloomberg Commodity Index; Performance metrics (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10479-022-05076-6

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