A New Forecasting Approach for Oil Price Using the Recursive Decomposition-Reconstruction-Ensemble Method with Complexity Traits.

Abstract

The subject of oil price forecasting has obtained an incredible amount of interest from academics and policymakers in recent years due to the widespread impact that it has on various economic fields and markets. Thus, a novel method based on decomposition-reconstruction-ensemble for crude oil price forecasting is proposed. Based on the Complete Ensemble Empirical Mode Decomposition with Adaptive Noise (CEEMDAN) technique, in this paper we construct a recursive CEEMDAN decomposition-reconstruction-ensemble model considering the complexity traits of crude oil data. In this model, the steps of mode reconstruction, component prediction, and ensemble prediction are driven by complexity traits. For illustration and verification purposes, the West Texas Intermediate (WTI) and Brent crude oil spot prices are used as the sample data. The empirical result demonstrates that the proposed model has better prediction performance than the benchmark models. Thus, the proposed recursive CEEMDAN decomposition-reconstruction-ensemble model can be an effective tool to forecast oil price in the future.