Crude oil price forecasting based on a novel hybrid long memory GARCH-M and wavelet analysis model

By Ling Lin, Yongcai Jiang, Helu Xiao, Zhongbao Zhou. 2020

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Abstract This paper proposes a novel hybrid forecast model to forecast crude oil price on considering the long memory, asymmetric, heavy-tail distribution, nonlinear and non-stationary characteristics of crude oil price. First, we use a signal de-noising method to reduce excessive noise significantly in the crude oil price. Then we employ empirical mode decomposition to transform the de-noised price into different intrinsic mode functions (IMFs). Finally, some complex long memory GARCH-M models are used to forecast different IMFs and a residual. Empirical results show that the proposed hybrid forecasting model WPD–EMD–ARMA–FIGARCH-M achieves significant effect during periods of extreme incidents. The robustness test shows that this hybrid model is superior to traditional models.

Subfields: Analytical Chemistry, Control and Systems Engineering, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/b61cb32ddce5a7f5aaff581ac77d98c08730830a