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on Forecasting |
| By: | COPPOLA ANDREA |
| Abstract: | Relying on the cost of carry model, we investigate the long-run relationship between spot and futures prices and use the information implied in these cointegrating relationships to forecast out of sample oil spot and futures price movements. In order to forecast oil price movements, we employ a Vector Error Correction Model (VECM), where the deviations from the long-run relationships between spot and futures prices constitute the equilibrium error. In order to evaluate forecasting performance we use the Random Walk Model (RWM) as a benchmark. We find that: (i) in-sample, the information in the futures market can explain a sizeable portion of oil price movements; (ii) out-of-sample, the VECM is able to beat the random alk model, both in terms of point forecasting and in terms of market timing ability. |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceiswp:253&r=for |
| By: | Andrea Coppola (University of Rome .Tor Vergata.) |
| Abstract: | Relying on the cost of carry model, we investigate the long-run relationship between spot and futures prices and use the information implied in these cointegrating relationships to forecast out of sample oil spot and futures price movements. In order to forecast oil price movements, we employ a Vector Error Correction Model (VECM), where the deviations from the long-run relationships between spot and futures prices constitute the equilibrium error. In order to evaluate forecasting performance we use the Random Walk Model (RWM) as a benchmark. We .nd that: (i) in-sample, the information in the futures market can explain a sizeable portion of oil price movements; (ii) out-of-sample, the VECM is able to beat the random walk model, both in terms of point forecasting and in terms of market timing ability |
| Keywords: | crude oil, futures market, forecasting. |
| JEL: | G1 Q3 Q4 |
| Date: | 2007–03–05 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:100&r=for |
| By: | Lanne, Markku |
| Abstract: | We compare the accuracy of the survey forecasts and forecasts implied by economic binary options on the U.S. nonfarm payroll change. These options are available for a number of ranges of the announced figure, and each pays $1 if the released nonfarm payroll change falls in the given range. For the first-release data both the market-based and survey forecasts are biased, while they are rational and approximately equally accurate for later releases. Both forecasts are more accurate for later releases. Because of predictability in the revision process, this indicates that the investors in the economic derivatives market are incapable of taking the measurement error in the preliminary estimates efficiently into account. This suggests that economic stability could be enhanced by more accurate first-release figures. |
| Keywords: | Expectations; economic derivatives; data vintage; real-time data |
| JEL: | C5 E44 D8 C82 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:3877&r=for |
| By: | Dong Fu |
| Abstract: | This paper extracts information on inflation expectations, the real interest rate, and various risk premiums by exploring the underlying common factors among the actual inflation, University of Michigan consumer survey inflation forecast, yields on U.S. nominal Treasury bonds, and particularly, yields on Treasury Inflation Protected Securities (TIPS). Our findings suggest that a significant liquidity risk premium on TIPS exists, which leads to inflation expectations that are generally higher than the inflation compensation measure at the 10-year horizon. On the other hand, the estimated expected inflation is mostly lower than the consumer survey inflation forecast at the 12-month horizon. Survey participants slowly adjust their inflation forecasts in response to inflation changes. The nominal interest rate adjustment lags inflation movements, too. Our model also edges out a parsimonious seasonal AR(2) time series model in the one-step-ahead forecast of inflation. |
| Keywords: | Inflation (Finance) |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddwp:0705&r=for |
| By: | Ghorbel, Ahmed; Trabelsi, Abdelwahed |
| Abstract: | This paper conducts a comparative evaluation of the predictive performance of various Value at Risk (VaR) models such as GARCH-normal, GARCH-t, EGARCH, TGARCH models, variance-covariance method, historical simulation and filtred Historical Simulation, EVT and conditional EVT methods. Special emphasis is paid on two methodologies related to the Extreme Value Theory (EVT): The Peaks over Threshold (POT) and the Block Maxima (BM). Both estimation techniques are based on limits results for the excess distribution over high thresholds and block maxima, respectively. We apply both unconditional and conditional EVT models to management of extreme market risks in stock markets. They are applied on daily returns of the Tunisian stock exchange (BVMT) and CAC 40 indexes with the intension to compare the performance of various estimation methods on markets with different capitalization and trading practices. The sample extends over the period July 29, 1994 to December 30, 2005. We use a rolling windows of approximately four years (n= 1000 days). The sub-period from July, 1998 for BVMT (from August 4, 1998 for CAC 40) has been reserved for backtesting purposes. The results we report demonstrate that conditional POT-EVT method produces the most accurate forecasts of extreme losses both for standard and more extreme VaR quantiles. The conditional block maxima EVT method is less accurate. |
| Keywords: | Financial Risk management; Value-at-Risk; Extreme Value Theory; Conditional EVT; Backtesting |
| JEL: | G0 C22 G15 |
| Date: | 2007–03–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:3963&r=for |
| By: | Giulio PALOMBA ([n.a.]); Alberto ZAZZARO (Universita' Politecnica delle Marche, Dipartimento di Economia); Emma SARNO ([n.a.]) |
| Abstract: | In this paper we introduce new definitions of pairwise and multivariate similarity between short-run dynamics of inflation rates in terms of equality of forecast functions and show that in the context of invertible ARIMA processes the Autoregressive distance introduced by Piccolo (1990) is a useful measure to evaluate such similarity. Then, we study the similarity of shortrun inflation dynamics across EU-15 area countries during the Euro period. Consistent with studies on inflation differentials and inflation persistence, our findings suggest that after seven years from the launch of the Euro the degree of similarity of short-run inflation dynamics across EU countries is still weak. |
| Keywords: | Euro, autoregressive metric, inflation dynamics |
| JEL: | C23 E31 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:anc:wpaper:289&r=for |