Forecasting Commodity Prices: Futures Versus Judgment

March 1, 2004

Preview Citation

Format: Chicago

Aasim M. Husain, and Chakriya Bowman. Forecasting Commodity Prices: Futures Versus Judgment, (USA: International Monetary Fund, 2004) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper assesses the performance of three types of commodity price forecasts—those based on judgment, those relying exclusively on historical price data, and those incorporating prices implied by commodity futures. For most of the 15 commodities in the sample, spot and futures prices appear to be nonstationary and to form a cointegrating relation. Spot prices tend to move toward futures prices over the long run, and error-correction models exploiting this feature produce more accurate forecasts. The analysis indicates that on the basis of statistical- and directional-accuracy measures, futures-based models yield better forecasts than historical-data-based models or judgment, especially at longer horizons.

Subject: Agricultural commodities, Commodities, Commodity prices, Financial institutions, Futures, Oil, Prices

Keywords: Agricultural commodities, ARMA model, Bloomberg Financial, Cointegration, Commodity futures futures price, Commodity price data, Commodity price forecast, Commodity prices, Commodity specific, Commodity-price forecast, Error correction, Forecast, Forecasting commodity price, Futures, Futures-price series, Global, LP, Oil, Price data, Price projection, Spot price series, WP

Publication Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2004/041
Stock No:

WPIEA0412004
ISBN:

9781451846133
ISSN:

1018-5941

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