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Real-time forecasts of the real price of oil

Christiane Baumeister UGent and Lutz Kilian (2012) JOURNAL OF BUSINESS & ECONOMIC STATISTICS. 30(2). p.326-336
abstract
We construct a monthly real-time dataset consisting of vintages for 1991.1-2010.12 that is suitable for generating forecasts of the real price of oil from a variety of models. We document that revisions of the data typically represent news, and we introduce backcasting and nowcasting techniques to fill gaps in the real-time data. We show that real-time forecasts of the real price of oil can be more accurate than the no-change forecast at horizons up to 1 year. In some cases, real-time mean squared prediction error (MSPE) reductions may be as high as 25% 1 month ahead and 24% 3 months ahead. This result is in striking contrast to related results in the literature for asset prices. In particular, recursive vector autoregressive (VAR) forecasts based on global oil market variables tend to have lower MSPE at short horizons than forecasts based on oil futures prices, forecasts based on autoregressive (AR) and autoregressive moving average (ARMA) models, and the no-change forecast. In addition, these VAR models have consistently higher directional accuracy.
Please use this url to cite or link to this publication:
author
organization
year
type
journalArticle (original)
publication status
published
subject
keyword
Vector autoregression, Real time data, Out-of-sample prediction, Futures, Oil price
journal title
JOURNAL OF BUSINESS & ECONOMIC STATISTICS
J. Bus. Econ. Stat.
volume
30
issue
2
pages
326 - 336
Web of Science type
Article
Web of Science id
000304485000015
JCR category
STATISTICS & PROBABILITY
JCR impact factor
1.932 (2012)
JCR rank
14/117 (2012)
JCR quartile
1 (2012)
ISSN
0735-0015
DOI
10.1080/07350015.2011.648859
language
English
UGent publication?
no
classification
A1
copyright statement
I have transferred the copyright for this publication to the publisher
id
2075171
handle
http://hdl.handle.net/1854/LU-2075171
date created
2012-03-27 14:39:32
date last changed
2016-12-19 15:45:18
@article{2075171,
  abstract     = {We construct a monthly real-time dataset consisting of vintages for 1991.1-2010.12 that is suitable for generating forecasts of the real price of oil from a variety of models. We document that revisions of the data typically represent news, and we introduce backcasting and nowcasting techniques to fill gaps in the real-time data. We show that real-time forecasts of the real price of oil can be more accurate than the no-change forecast at horizons up to 1 year. In some cases, real-time mean squared prediction error (MSPE) reductions may be as high as 25\% 1 month ahead and 24\% 3 months ahead. This result is in striking contrast to related results in the literature for asset prices. In particular, recursive vector autoregressive (VAR) forecasts based on global oil market variables tend to have lower MSPE at short horizons than forecasts based on oil futures prices, forecasts based on autoregressive (AR) and autoregressive moving average (ARMA) models, and the no-change forecast. In addition, these VAR models have consistently higher directional accuracy.},
  author       = {Baumeister, Christiane and Kilian, Lutz},
  issn         = {0735-0015},
  journal      = {JOURNAL OF BUSINESS \& ECONOMIC STATISTICS},
  keyword      = {Vector autoregression,Real time data,Out-of-sample prediction,Futures,Oil price},
  language     = {eng},
  number       = {2},
  pages        = {326--336},
  title        = {Real-time forecasts of the real price of oil},
  url          = {http://dx.doi.org/10.1080/07350015.2011.648859},
  volume       = {30},
  year         = {2012},
}

Chicago
Baumeister, Christiane, and Lutz Kilian. 2012. “Real-time Forecasts of the Real Price of Oil.” Journal of Business & Economic Statistics 30 (2): 326–336.
APA
Baumeister, C., & Kilian, L. (2012). Real-time forecasts of the real price of oil. JOURNAL OF BUSINESS & ECONOMIC STATISTICS, 30(2), 326–336.
Vancouver
1.
Baumeister C, Kilian L. Real-time forecasts of the real price of oil. JOURNAL OF BUSINESS & ECONOMIC STATISTICS. 2012;30(2):326–36.
MLA
Baumeister, Christiane, and Lutz Kilian. “Real-time Forecasts of the Real Price of Oil.” JOURNAL OF BUSINESS & ECONOMIC STATISTICS 30.2 (2012): 326–336. Print.