A new hybrid approach for crude oil price forecasting: Evidence from multi-scale data

• URL: http://arxiv.org/abs/2002.09656v1
• Date: Sat, 22 Feb 2020 07:56:10 GMT
• Title: A new hybrid approach for crude oil price forecasting: Evidence from multi-scale data
• Authors: Yang Yifan, Guo Ju'e, Sun Shaolong, and Li Yixin
• Abstract summary: We propose a new hybrid approach for monthly crude oil price forecasting. This hybrid approach consists of K-means method, kernel principal component analysis and kernel extreme learning machine. At the method level, the approaches with K-means perform better than those without K-means.
• Score: 0.0
• License: http://arxiv.org/licenses/nonexclusive-distrib/1.0/
• Abstract: Faced with the growing research towards crude oil price fluctuations influential factors following the accelerated development of Internet technology, accessible data such as Google search volume index are increasingly quantified and incorporated into forecasting approaches. In this paper, we apply multi-scale data that including both GSVI data and traditional economic data related to crude oil price as independent variables and propose a new hybrid approach for monthly crude oil price forecasting. This hybrid approach, based on divide and conquer strategy, consists of K-means method, kernel principal component analysis and kernel extreme learning machine , where K-means method is adopted to divide input data into certain clusters, KPCA is applied to reduce dimension, and KELM is employed for final crude oil price forecasting. The empirical result can be analyzed from data and method levels. At the data level, GSVI data perform better than economic data in level forecasting accuracy but with opposite performance in directional forecasting accuracy because of Herd Behavior, while hybrid data combined their advantages and obtain best forecasting performance in both level and directional accuracy. At the method level, the approaches with K-means perform better than those without K-means, which demonstrates that divide and conquer strategy can effectively improve the forecasting performance.

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