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The Prediction of Gold Futures Prices at the Shanghai Futures Exchange Based on the MEEMD-CS-Elman Model

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  • Xiaowen Wang
  • Ying Ma
  • Wen Li

Abstract

The Gold futures market is a complex nonlinear system with the prediction of the futures prices of gold, one of the core issues faced by investors. Compared with more traditional approaches, empirical mode decomposition (EMD) and artificial neural network are the more powerful tools with which to deal with nonlinear and nonstationary price problems. By introducing mirroring extension (ME), EMD, Cuckoo Search (CS) algorithm, and Elman neural network, this article constructs the mirroring extension empirical mode decomposition (MEEMD)-CS-Elman model to forecast the price of gold futures using gold future AU0 price data from August 29, 2013, to October 18, 2018, at the Shanghai Futures Exchange (SFE) in China. Empirical results show that Elman combined with EMD is superior to single Elman in performance. Moreover, there exists an obvious endpoint effect by applying EMD to the price of AU0. By introducing the ME method, the endpoint effect can be dealt with better. Furthermore, by introducing the CS algorithm to optimize the initial weights and biases for Elman, the constructed MEEMD-CS-Elman model achieves far more accurate prediction results compared with either the EMD-Elman or the MEEMD-Elman model in terms of performance criterion: mean absolute difference (MAD), mean absolute percentage error (MAPE), root-mean-square error (RMSE), and directional symmetry (DS). In particular, the DS indicator, which reflects rising and falling prices, tends to be more attractive for investors. The value of the DS indicator in the MEEMD-CS-Elman model reaches 0.75207, meaning that the proposed model predicts the directions of increasing and falling prices quite precisely. Hence, by applying the proposed model, investors can make more scientific and accurate decisions and better reduce their investment risks.

Suggested Citation

  • Xiaowen Wang & Ying Ma & Wen Li, 2021. "The Prediction of Gold Futures Prices at the Shanghai Futures Exchange Based on the MEEMD-CS-Elman Model," SAGE Open, , vol. 11(1), pages 21582440211, March.
    • Handle: RePEc:sae:sagope:v:11:y:2021:i:1:p:21582440211001866
    DOI: 10.1177/21582440211001866
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