Multiscale Agricultural Commodities Forecasting Using Wavelet-SARIMA Process

Mamadou-Diéne Diop and Jules Sadefo Kamdem
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Mamadou-Diéne Diop: Université de Montpellier

Journal of Quantitative Economics, 2023, vol. 21, issue 1, No 1, 40 pages

Abstract: Abstract Forecasts of spot or future prices for agricultural commodities make it possible to anticipate the favorable or above all unfavorable development of future profits from the exploitation of agricultural farms or agri-food enterprises. Previous research has shown that cyclical behavior is a dominant feature of the time series of prices of certain agricultural commodities, which may be affected by a seasonal component. Wavelet analysis makes it possible to capture this cyclicity by decomposing a time series into its frequency and time domains. This paper proposes a time-frequency decomposition based approach to choose a seasonal auto-regressive aggregate (SARIMA) model for forecasting the monthly prices of certain agricultural futures prices. The originality of the proposed approach is due to the identification of the optimal combination of the wavelet transformation type, the wavelet function and the number of decomposition levels used in the multi-resolution approach (MRA), that significantly increase the accuracy of the forecast. Our SARIMA hybrid approach contributes to take into account the cyclicity and of the seasonality when predicting commodity prices. As a relevant result, our study allows an economic agent, according to his forecasting horizon, to choose according to the available data, a specific SARIMA process for forecasting.

Keywords: Commodities; Forecast; Multi-resolution analysis; Wavelets; SARIMA (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s40953-022-00329-4

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