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Article

Forecasting Commodity Prices: Looking for a Benchmark

Collegium of Economic Analysis, SGH Warsaw School of Economics, 02-554 Warsaw, Poland
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Academic Editor: Konstantinos Nikolopoulos
Received: 4 May 2021 / Revised: 11 June 2021 / Accepted: 17 June 2021 / Published: 19 June 2021
(This article belongs to the Special Issue Forecasting Commodity Markets)
The random walk, no-change forecast is a customary benchmark in the literature on forecasting commodity prices. We challenge this custom by examining whether alternative models are more suited for this purpose. Based on a literature review and the results of two out-of-sample forecasting experiments, we draw two conclusions. First, in forecasting nominal commodity prices at shorter horizons, the random walk benchmark should be supplemented by futures-based forecasts. Second, in forecasting real commodity prices, the random walk benchmark should be supplemented, if not substituted, by forecasts from the local projection models. In both cases, the alternative benchmarks deliver forecasts of comparable and, in many cases, of superior accuracy. View Full-Text
Keywords: commodity prices; commodity futures; mean-reversion; local projection; forecasting commodity prices; commodity futures; mean-reversion; local projection; forecasting
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MDPI and ACS Style

Kwas, M.; Rubaszek, M. Forecasting Commodity Prices: Looking for a Benchmark. Forecasting 2021, 3, 447-459. https://0-doi-org.brum.beds.ac.uk/10.3390/forecast3020027

AMA Style

Kwas M, Rubaszek M. Forecasting Commodity Prices: Looking for a Benchmark. Forecasting. 2021; 3(2):447-459. https://0-doi-org.brum.beds.ac.uk/10.3390/forecast3020027

Chicago/Turabian Style

Kwas, Marek, and Michał Rubaszek. 2021. "Forecasting Commodity Prices: Looking for a Benchmark" Forecasting 3, no. 2: 447-459. https://0-doi-org.brum.beds.ac.uk/10.3390/forecast3020027

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