Forecasting Oil price and Volatility

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Yu, Man Tao (2009) Forecasting Oil price and Volatility. [Dissertation (University of Nottingham only)] (Unpublished)

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Abstract

Commodities prices play a crucial role in commodity-related investments, strategic planning, and affect the economy. Fluctuations in commodity prices affect the decision making by producers and consumers. Within the commodity products, crude oil is the central source of energy supply. The continuous rise in oil price since 2002 has caused public concerns of higher inflation rate for different countries. In July 2008, crude oil price has rise to a historic price US$147/barrel, and dropped to US$33/ barrel at the end of 2008. The high increase in the oil price has brought an concern of shrinking of world economy. The ability to accurately forecast the prices of commodities are therefore an important concern in both policy and finance area.

There are three main concerns in this thesis: first, to identify the ability of the existing volatility and price forecasting models; second, to address model forecasting accuracy by using different length and different frequency data set; third, to link the findings with the investment decisions. The empirical results showed that EGARCH model has the best forecasting ability in forecasting volatility, while OU is the best model in forecasting Oil price. Therefore I suggest speculators, who invest in derivatives, to use EGARCH model with daily data to forecast volatility. For policy makers and medium to long term investors, I suggest the use of OU model with weekly data in forecasting oil price.

Item Type: Dissertation (University of Nottingham only)
Keywords: Oil price, Volatlity, Forecast, GARCH
Depositing User: EP, Services
Date Deposited: 03 Feb 2010 14:18
Last Modified: 16 Feb 2018 11:59
URI: https://eprints.nottingham.ac.uk/id/eprint/23162

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