Forecasting Commodity Prices: Futures Versus Judgment

Aasim Husain and Tanya Bowman

No 2004/041, IMF Working Papers from International Monetary Fund

Abstract: This paper assesses the performance of three types of commodity price forecasts—those based on judgment, those relying exclusively on historical price data, and those incorporating prices implied by commodity futures. For most of the 15 commodities in the sample, spot and futures prices appear to be nonstationary and to form a cointegrating relation. Spot prices tend to move toward futures prices over the long run, and error-correction models exploiting this feature produce more accurate forecasts. The analysis indicates that on the basis of statistical- and directional-accuracy measures, futures-based models yield better forecasts than historical-data-based models or judgment, especially at longer horizons.

Keywords: WP; Commodity prices; futures; cointegration; error correction; forecast; Bloomberg Financial; LP; commodity-price forecast; ARMA model; commodity futures futures price; commodity specific; futures-price series; commodity price forecast; forecasting commodity price; price data; price projection; commodity price data; spot price series; Agricultural commodities; Oil; Global (search for similar items in EconPapers)
Pages: 28
Date: 2004-03-01
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Citations: View citations in EconPapers (13)

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