Prediction of the West Texas Intermediate Crude Oil Price Using ARIMA Model and ARIMA-GARCH Model

Minzhao Li

2024

Abstract

Crude oil stands as a pivotal energy source and raw material indispensable for modern life and various production activities. The fluctuations in its price are intricately linked to the seamless functioning of the macroeconomy, the healthy development of the capital market, and the choices of individual investors. However, under the influence of various external factors, international crude oil price changes are characterized by complexity and are very difficult to predict. This study delves into the monthly fluctuations of West Texas Intermediate (WTI) crude oil prices, employing the ARIMA and GARCH models to shed light on its future trajectory. Methodically, it subjects the data to normality tests, stationarity tests, and white noise tests, while leveraging the AIC information criterion and minimum MSE criterion to fine-tune the model. Through rigorous analysis, the study establishes both ARIMA (1,1,0) and ARIMA(1,1,0)-GARCH (1,1) models and both models forecast a modest uptick in oil prices over the next three months, spanning May, June, and July of 2024. This article adds GARCH model and comparing with the traditional ARIMA model, ARIMA-GARCH model takes conditional heteroskedasticity into account and can be more accurate and comprehensive in prediction, which can provide certain reference and suggestion for various investors.

Paper Citation

in Harvard Style

Li M. (2024). Prediction of the West Texas Intermediate Crude Oil Price Using ARIMA Model and ARIMA-GARCH Model. In Proceedings of the 1st International Conference on Innovations in Applied Mathematics, Physics and Astronomy - Volume 1: IAMPA; ISBN 978-989-758-722-1, SciTePress, pages 110-118. DOI: 10.5220/0012999200004601

in Bibtex Style

@conference{iampa24,
author={Minzhao Li},
title={Prediction of the West Texas Intermediate Crude Oil Price Using ARIMA Model and ARIMA-GARCH Model},
booktitle={Proceedings of the 1st International Conference on Innovations in Applied Mathematics, Physics and Astronomy - Volume 1: IAMPA},
year={2024},
pages={110-118},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0012999200004601},
isbn={978-989-758-722-1},
}

in EndNote Style

TY - CONF

JO - Proceedings of the 1st International Conference on Innovations in Applied Mathematics, Physics and Astronomy - Volume 1: IAMPA
TI - Prediction of the West Texas Intermediate Crude Oil Price Using ARIMA Model and ARIMA-GARCH Model
SN - 978-989-758-722-1
AU - Li M.
PY - 2024
SP - 110
EP - 118
DO - 10.5220/0012999200004601
PB - SciTePress