TY  - UNPD
A1  - Baumeister, Christiane
A1  - Kilian, Lutz
T1  - Forecasting the real price of oil in a changing world: a forecast combination approach : [Version November 13, 2013]
T2  - Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2013,11
N2  - The U.S. Energy Information Administration (EIA) regularly publishes monthly and quarterly forecasts of the price of crude oil for horizons up to two years, which are widely used by practitioners. Traditionally, such out-of-sample forecasts have been largely judgmental, making them difficult to replicate and justify. An alternative is the use of real-time econometric oil price forecasting models. We investigate the merits of constructing combinations of six such models. Forecast combinations have received little attention in the oil price forecasting literature to date. We demonstrate that over the last 20 years suitably constructed real-time forecast combinations would have been systematically more accurate than the no-change forecast at horizons up to 6 quarters or 18 months. MSPE reduction may be as high as 12% and directional accuracy as high as 72%. The gains in accuracy are robust over time. In contrast, the EIA oil price forecasts not only tend to be less accurate than no-change forecasts, but are much less accurate than our preferred forecast combination. Moreover, including EIA forecasts in the forecast combination systematically lowers the accuracy of the combination forecast. We conclude that suitably constructed forecast combinations should replace traditional judgmental forecasts of the price of oil.
T3  - CFS working paper series - 2013, 11 
KW  - forecast combination
KW  - real-time data
KW  - model misspecification
KW  - structural change
KW  - oil price
Y1  - 2013
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/32488
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-324888
IS  - Version November 13, 2013
PB  - Center for Financial Studies
CY  - Frankfurt, M.
ER  -