Dhifaoui, Z., Jabeur, S.B., Khalfaoui, R. et al. (1 more author) (2023) Time-varying partial-directed coherence approach to forecast global energy prices with stochastic volatility model. Journal of Forecasting, 42 (8). pp. 2292-2306. ISSN 0277-6693
Abstract
For investors and policymakers, forecasting energy prices with accuracy is essential and plays a major role in the global bulk commodity markets. The current study proposes a novel hybrid forecasting model to predict global energy prices, namely, time-varying partial-directed coherence with stochastic volatility. The proposed method combines partial-directed coherence analysis and stochastic volatility models. Accordingly, this study attempts to provide an in-depth understanding of the relationship between energy markets and global economic conditions as well as the causality pathway between the underlined markets. Monthly data from January 1982 to July 2022 is used in this study. The results show a strong causality between global economic conditions, European oil, and natural gas prices and have profound implications for policymakers. For completeness, we extend the analysis to the forecasting ability of global economic conditions for oil and natural gas prices. The out-of-sample results show that the autoregressive model incorporating the global economic conditions index can significantly improve the accuracy of oil and gas price forecasts. In addition, our results are strongly robust over a variety of time horizons for forecasting, and they provide valuable insights into the forecasting choices to guide investment strategies in the energy and financial market.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2023 The Authors. Journal of Forecasting published by John Wiley & Sons Ltd. This is an open access article under the terms of the Creative Commons Attribution-NonCommercial License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited and is not used for commercial purposes. |
Keywords: | European energy prices, forecasting, global economic conditions, partial-directed coherence,stochastic volatility |
Dates: |
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Institution: | The University of Leeds |
Academic Units: | The University of Leeds > Faculty of Business (Leeds) > Economics Division (LUBS) (Leeds) |
Depositing User: | Symplectic Publications |
Date Deposited: | 25 Jul 2023 11:42 |
Last Modified: | 15 Nov 2024 12:13 |
Status: | Published |
Publisher: | Wiley |
Identification Number: | 10.1002/for.3015 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:201814 |