Forecasting the price of crude oil via convenience yield predictions

Thomas Knetsch

No 2006,12, Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank

Abstract: The paper develops an oil price forecasting technique which is based on the present value model of rational commodity pricing. The approach suggests shifting the forecasting problem to the marginal convenience yield which can be derived from the cost-of-carry relationship. In a recursive out-of-sample analysis, forecast accuracy at horizons within one year is checked by the root mean squared error as well as the mean error and the frequency of a correct direction-of-change prediction. For all criteria employed, the proposed forecasting tool outperforms the approach of using futures prices as direct predictors of future spot prices. Vis-à-vis the random-walk model, it does not significantly improve forecast accuracy but provides valuable statements on the direction of change.

Keywords: oil price forecasts; rational commodity pricing; convenience yield; single-equation model (search for similar items in EconPapers)
JEL-codes: C22 E37 G12 G13 Q40 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-ecm, nep-ene, nep-fin and nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Forecasting the price of crude oil via convenience yield predictions (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdp1:4353

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