An EEMD‐LSTM, SVR, and BP decomposition ensemble model for steel future prices forecasting

Abstract

AbstractThe forecasting of steel futures prices is important for the steel futures market, even for the steel industry. We propose a decomposition ensemble model that incorporates the Ensemble Empirical Mode Decomposition (EEMD), Long Short‐Term Memory (LSTM), Support Vector Regression (SVR), and Back Propagation (BP) neural network to forecast steel futures prices. The forecasting procedures are as follows: (1) The price data are initially decomposed into several relatively independent Intrinsic Mode Functions (IMFs) and a residue using EEMD. (2) The IMFs are then reconstructed as components representing short‐term, medium‐term, and long‐term frequencies via fine‐to‐coarse. (3) LSTM, SVR, and BP neural network are utilized to forecast the short‐term, medium‐term, and long‐term reconstructed components, respectively. (4) The prediction results for each component are simply added to the final prediction results. The accuracy of the proposed model is compared with several benchmark models by experiments and evaluated by some prediction evaluation indexes. The experimental results show that our model outperforms other models in terms of forecast accuracy, confirming its strong predictive capabilities. This study provides some suggestions for investment and decision making by participants in the steel futures market. It may promote the smooth operation of the steel futures market and shed some light on the operation of the steel industry.