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Comparative analysis of forecasting performance: crude palm oil futures vs expert opinions
| Content Provider | Semantic Scholar |
|---|---|
| Author | Ahmed, Abdullahi Farah Arshad, Fatimah M. Latif, Ismail Abd |
| Copyright Year | 2002 |
| Abstract | Introduction The main economic functions of the futures market are to provide price discovery and risk management facilities. If the market is not efficient, effective transmission of information from one market to another will be impaired, thus the value ofthe futures market in price discovery and hedging. In the present article we analyze a particular commodity futures market, namely MDEX (Malaysian Derivatives Exchange) crude palm oil futures et al. with comparing expert opinions. The . creation of the crude palm oil (CPO) futures market in Malaysia was to fulfill the need for an efficient pricing and hedging mechanism for Malaysia's' palm oil. Therefore, the extent to which CPO futures market has served as an efficient center of price discovery and risk management has been the focus of considerable research. In general, debate has centered around the extent of which CPO futures market provide price leadership to cash market and the ability of futures market to predict subsequent spot price in accurate way. Empirical evidence has shown that CPO futures prices performed relative better compared to other forecasting models. However, no comparison is made in forecast accuracy of CPO futures with expert opinion. This approach is unique in the sense that it examines the relative efficiency of ex ante forecasts rather then ex post. The purposes of this study are: firstly, to evaluate the forecast accuracy of the CPO futures market relative to expert prediction. Secondly, to test the relationship between the futures, forward and cash prices, to examine whether these price series have the same properties and relationship in the long run. Materials and Methods Using time-series techniques, its possible to estimate the nature of the relationship between two prices. These price series in generally believed to be nonstationary and therefore much of the variability in the results may have had to do with the spurious nature of regressing non stationary series on each other. In order to overcome this problem, the cointegration technique as proposed by Engle et al. and Granger et al.(1987) could be used. This analysis is carried out in three stages. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://psasir.upm.edu.my/id/eprint/29955/1/Comparative%20Analysis%20of%20Forecasting%20Performance.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
