Real-time forecast combinations for the oil price

Anthony Garratt, Shaun P. Vahey, Yunyi Zhang*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

16 Citations (Scopus)

Abstract

Baumeister and Kilian (Journal of Business and Economic Statistics, 2015, 33(3), 338–351) combine forecasts from six empirical models to predict real oil prices. In this paper, we broadly reproduce their main economic findings, employing their preferred measures of the real oil price and other real-time variables. Mindful of the importance of Brent crude oil as a global price benchmark, we extend consideration to the North Sea-based measure and update the evaluation sample to 2017:12. We model the oil price futures curve using a factor-based Nelson–Siegel specification estimated in real time to fill in missing values for oil price futures in the raw data. We find that the combined forecasts for Brent are as effective as for other oil price measures. The extended sample using the oil price measures adopted by Baumeister and Kilian yields similar results to those reported in their paper. Also, the futures-based model improves forecast accuracy at longer horizons.

Original languageEnglish
Pages (from-to)456-462
Number of pages7
JournalJournal of Applied Econometrics
Volume34
Issue number3
DOIs
Publication statusPublished - 1 Apr 2019
Externally publishedYes

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