Forecasting Base Metal Prices with an International Stock Index

Pablo Pincheira, Nicolas Hardy, Andrea Bentancor, Cristóbal Henriquez and Ignacio Tapia

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we show that the MSCI ACWI Metals and Mining Index has the ability to predict base metal prices. We use both in-sample and out-of-sample exercises to conduct such examination. The theoretical underpinning of these results relies on the present-value model for stock-price determination. This model has the implication of Granger causality from stock prices to their key determinants. In the case of metal and mining producers, one of the key elements determining the value of these firms is the price of the commodity they produce and export. Our results are consistent with this theoretical framework, as forecasts based on a model including the MSCI index outperform, in terms of Mean Squared Prediction Error, forecasts that do not use the information contained in that index.

Keywords: Forecasting; commodities; base metals; univariate time-series models; out-of-sample comparison; base metal equity securities. (search for similar items in EconPapers)
JEL-codes: C10 C12 C2 C22 C4 C5 C52 C53 C58 C6 E0 E3 E31 E32 E37 E4 E47 E6 F3 F31 F4 F44 F47 G0 G1 G12 G17 (search for similar items in EconPapers)
Date: 2021-05-18
New Economics Papers: this item is included in nep-for, nep-mac and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Forecasting Base Metal Prices with an International Stock Index (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:107828

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