FORECASTING THE PRICE OF CRUDE OIL WITH MULTIPLE PREDICTORS

For the price of crude oil, this paper aims to investigate the predictive content of a variety of variables including oil futures prices, exchange rates of particular countries and stock-market indexes. Out-of-sample forecasting results suggest that oil futures prices have marginal predictive power for the price of oil at a 1-month forecast horizon. However, they generally lose their forecasting power at higher forecast horizons. The results also suggest that exchange rates help predicting oil prices at higher forecast horizons. Th e paper also considers forecast averaging and variable selection methods, and fınds that forecast averaging significantly improves the forecasting performances.