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Entropy 2015, 17(10), 7167-7184; doi:10.3390/e17107167

Wavelet Entropy Based Analysis and Forecasting of Crude Oil Price Dynamics

1
School of Economics and Management, Beijing University of Chemical Technology, Beijing 100029, China
2
College of Information Science and Technology, Beijing University of Chemical Technology, Beijing 100029, China
*
Author to whom correspondence should be addressed.
Academic Editor: Raúl Alcaraz Martínez
Received: 24 May 2015 / Revised: 31 August 2015 / Accepted: 15 October 2015 / Published: 22 October 2015
(This article belongs to the Special Issue Wavelet Entropy: Computation and Applications)
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Abstract

For the modeling of complex and nonlinear crude oil price dynamics and movement, wavelet analysis can decompose the time series and produce multiple economically meaningful decomposition structures based on different assumptions of wavelet families and decomposition scale. However, the determination of the optimal model specification will critically affect the forecasting accuracy. In this paper, we propose a new wavelet entropy based approach to identify the optimal model specification and construct the effective wavelet entropy based forecasting models. The wavelet entropy algorithm is introduced to determine the optimal wavelet families and decomposition scale, that will produce the improved forecasting performance. Empirical studies conducted in the crude oil markets show that the proposed algorithm outperforms the benchmark model, in terms of conventional performance evaluation criteria for the model forecasting accuracy. View Full-Text
Keywords: wavelet entropy; wavelet analysis; crude oil forecasting; Autoregressive Moving Average (ARMA) model wavelet entropy; wavelet analysis; crude oil forecasting; Autoregressive Moving Average (ARMA) model
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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Zou, Y.; Yu, L.; He, K. Wavelet Entropy Based Analysis and Forecasting of Crude Oil Price Dynamics. Entropy 2015, 17, 7167-7184.

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