Forecasting commodity prices: GARCH, jumps, and mean reversion

Journal of Forecasting

Volumn 27, Issue 4, 2008, Pages 279-291

  Bernard, Jean Thomas ^a,d   Khalaf, Lynda ^b   Kichian, Maral ^c   McMahon, Sebastien ^a,e  

^a UNIVERSITÉ LAVAL   (Canada)

^b CARLETON UNIVERSITY   (Canada)

^c BANK OF CANADA   (Canada)

^d Pavillon J A De Sève   (Canada)

^e Ministry of Finance   (Canada)

Author keywords

Commodity price; Conditional heteroskedasticity; Convenience yield; Discrete jumps; Forecast performance

Indexed keywords

COSTS; FINANCIAL MARKETS; FORECASTING; RANDOM PROCESSES; STOCHASTIC SYSTEMS;

COMMODITY PRICES; CONDITIONAL HETEROSKEDASTICITY; CONVENIENCE YIELD; DISCRETE JUMP; FORECAST PERFORMANCE; MEAN-REVERSION; RANDOM WALK MODELING; STOCHASTIC-MODELING; STOCHASTICS; TIME VARYING;

STOCHASTIC MODELS;

EID: 47749100822     PISSN: 02776693     EISSN: 1099131X     Source Type: Journal    
DOI: 10.1002/for.1061     Document Type: Article

References (36)

1. Ahn CM, Thompson HE. 1988. Jump-diffusion processes and the term structure of interest. Journal of Finance 43: 155-174.
2. Ahrens WA, Sharma VR. 1997. Trends in natural resource commodity prices: deterministic or stochastic? Journal of Environmental Economics and Management 33: 59-74.
3. Aït-Sahalia Y. 2004. Disentangling diffusion from jumps. Journal of Financial Economics 74: 487-528.
4. Akgiray V, Booth G. 1988. Mixed diffusion-jump process modelling of exchange rate movements. Review of Economics and Statistics 70: 631-637.
5. Akgiray V, Booth G, Hatem JJ, Chowdhury M. 1991. Conditional dependence in precious metal prices. Financial Review 26: 367-386.
6. Andrews DWK. 2001. Testing when a parameter is on the boundary of the maintained hypothesis. Econometrica 69: 683-733.
7. Bakshi G, Cao C, Chen Z. 1997. Empirical performance of alternative option pricing models. Journal of Finance 52: 2003-2049.
8. Bakshi G, Cao C, Chen Z. 2000. Pricing and hedging long-term options models. Journal of Econometrics 94: 277-318.
9. Ball C, Torous W. 1985. On jumps in common stock prices and their impact on call option pricing. Journal of Financed: 155-173.
10. Bates DS. 1996a. Dollar jump fears, 1984-1992: distributional abnormalities implicit in currency futures options. Journal of International Money and Finance 15: 65-93.
11. Bates DS. 1996b. Jumps and stochastic volatility: exchange rate processes implicit in Deutsche Mark options. Review of Financial Studies 9: 69-107.
12. Bates DS. 2000. Post-87 crash fears in S&P 500 futures options. Journal of Econometrics 94: 181-238.
13. Beck S. 2001. Autoregressive conditional heteroscedasticity in commodity spot prices. Journal of Applied Econometrics 16: 115-132.
14. Bilodeau JF. 1998. Analyse de processus de sauts dans les prix du pétrole brut. Masters thesis, Université Laval.
15. Bird A. 1990. Price determination in the market for aluminium. In Primary Commodity Prices: Economic Models and Policy, Winters AL, Sapsford D (eds). Cambridge University Press: Cambridge, UK; 134-151.
16. Brorsen BW, Yang SR. 1994. Nonlinear dynamics and the distribution of daily stock index returns. Journal of Financial Research 17: 187-203.
17. Chernov M, Gallant AR, Ghysels E, Tauchen G. 2003. Alternative models for stock price dynamics. Journal of Econometrics 116: 225-257.
18. Cortázar G, Schwartz ES. 2003. Implementing a stochastic model for oil future prices. Energy Economics 25: 215-238.
19. Das SR. 2002. The surprise element: jumps in interest rates. Journal of Econometrics 106: 27-65.
20. Drost FC, Nijman TE, Werker BJM. 1998. Estimation and testing in models containing both jump and conditional heteroskedasticity. Journal of Business and Economic Statistics 16: 237-243.
21. Gibson R, Schwartz ES. 1990. stochastic convenience yield and the pricing of oil contingent claims. Journal of Finance 45: 959-976.
22. Gilbert CL. 1995. Modelling market fundamentals: a model of the aluminium market. Journal of Applied Econometrics 10: 385-410.
23. Jarrow RA, Rosenfeld ER. 1984. Jump risks and the intertemporal capital asset pricing model. Journal of Business 57: 337-351.
24. Jorion P. 1988. On jump processes in the foreign exchange and stock markets. Review of Financial Studies 1: 427-445.
25. Khalaf L, Saphores JD, Bilodeau JF. 2003. Simulation-based exact jump tests in models with conditional heteroskedasticity. Journal of Economic Dynamic and Control 28: 531-553.
26. Labys WC, Lesourd JB, Badillo D. 1998. The existence of metal price cycles. Resources Policy 24: 147-155.
27. Labys WC, Achouch A, Terraza M. 1999. Metal prices and the business cycle. Resources Policy 25: 229-238.
28. Merton RC. 1976. Option pricing when underlying stock returns are discontinuous. Journal of Financial Economics 3: 125-144.
29. Moore MJ, Cullen U. 1995. Speculative efficiency on the London Metal Exchange. The Manchester School 63: 235-256.
30. Pan J. 2002. The jump-risk premia implicit in options: evidence from an integrated time-series study. Journal of Financial Economics 63: 3-50.
31. Perron P. 1989. The great crash, the oil price shock, and the unit root hypothesis. Econometrica 57: 1361-1401.
32. Perron P. 1993. Erratum: the great crash, the oil price shock, and the unit root hypothesis. Econométrica 61: 248-249.
33. Pindyck RS. 1999. The long run evolution of energy prices. Energy Journal 20: 1-27.
34. Saphores JD, Khalaf L, Pelletier D. 2002. On jumps and arch effects in natural resource prices: an application to stumpage prices from Pacific Northwest national forests. American Journal of Agriculture Economics 84: 387-400.
35. Schwartz ES. 1997. The stochastic behavior of commodity prices: implications for valuation and hedging. Journal of Finance 52: 923-973.
36. Schwartz ES, Smith JE. 2000. Short-term variations and long-term dynamics in commodity prices. Management Sciences: 893-911.