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Comparing the Forecasting Performance of Futures Oil Prices with Genetically Evolved Neural Networks

Author

Listed:
  • Mona Shazly

    (Columbia College)

  • Alice Lou

    (Columbia College)

Abstract

In this paper, a hybrid system combining neural networks and genetic training is designed to forecast future oil prices. The architectural design is that of the multilayer back propagation network that is fed monthly prices for West Texas Intermediate covering the period 1986–2014. The model’s predictions are compared to those of the one, two, three, and four-month futures prices and are evaluated both on their level of accuracy as well as correctness. While accuracy measures the degree of error, correctness tests the model’s ability to predict the direction of the movement. By processing information more efficiently, and identifying patterns that may be ill-defined as a result of pronounced price volatility, this paper aims to improve the accuracy of oil price forecasts.

Suggested Citation

  • Mona Shazly & Alice Lou, 2016. "Comparing the Forecasting Performance of Futures Oil Prices with Genetically Evolved Neural Networks," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 22(4), pages 361-376, November.
    • Handle: RePEc:kap:iaecre:v:22:y:2016:i:4:d:10.1007_s11294-016-9599-3
    DOI: 10.1007/s11294-016-9599-3
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    References listed on IDEAS

    as
    1. El Shazly, Mona R. & El Shazly, Hassan E., 1999. "Forecasting currency prices using a genetically evolved neural network architecture," International Review of Financial Analysis, Elsevier, vol. 8(1), pages 67-82.
    2. Siddhivinayak Kulkarni & Imad Haidar, 2009. "Forecasting Model for Crude Oil Price Using Artificial Neural Networks and Commodity Futures Prices," Papers 0906.4838, arXiv.org.
    3. Ron Alquist & Lutz Kilian, 2010. "What do we learn from the price of crude oil futures?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(4), pages 539-573.
    4. Saeed Moshiri & Faezeh Foroutan, 2006. "Forecasting Nonlinear Crude Oil Futures Prices," The Energy Journal, , vol. 27(4), pages 81-96, October.
    5. Yu, Lean & Wang, Shouyang & Lai, Kin Keung, 2008. "Forecasting crude oil price with an EMD-based neural network ensemble learning paradigm," Energy Economics, Elsevier, vol. 30(5), pages 2623-2635, September.
    6. Mona Shazly & Hassan Shazly, 1999. "Forecasting currency prices using a genetically evolved neural network architecture," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 5(1), pages 148-148, February.
    7. Andrew H. McCallum & Tao Wu, 2005. "Do oil futures prices help predict future oil prices?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue dec30.
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    More about this item

    Keywords

    Oil futures forecast; Neural networks; Genetic training;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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