Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/19642
Authors: 
Knetsch, Thomas A.
Year of Publication: 
2006
Series/Report no.: 
Discussion paper Series 1 / Volkswirtschaftliches Forschungszentrum der Deutschen Bundesbank 2006,12
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.
Subjects: 
oil price forecasts
rational commodity pricing
convenience yield
single-equation model
JEL: 
C22
Q40
G13
G12
E37
Document Type: 
Working Paper

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