Table 6 Out-of-sample forecast...

Table 6

Out-of-sample forecast evaluation of oil risk models [Nested models]

Historical average (HA) versus Brent
	Global		Europe		US		Asia		Solar		Wind
RMSE	HA	Brent	HA	Brent	HA	Brent	HA	Brent	HA	Brent	HA	Brent
h = 10	0.919	0.919	1.278	1.278	1.147	1.147	1.297	1.297	1.760	1.760	1.187	1.175
h = 30	0.921	0.921	1.275	1.274	1.146	1.146	1.295	1.294	1.757	1.758	1.186	1.174
h = 60	1.048	1.042	1.270	1.270	1.143	1.143	1.289	1.288	1.757	1.758	1.191	1.180
h = 120	1.114	1.104	1.258	1.257	1.134	1.134	1.280	1.279	1.751	1.751	1.180	1.169
CW	HA	Brent	HA	Brent	HA	Brent	HA	Brent	HA	Brent	HA	Brent
h = 10	0.001		0.003		−0.001		0.004		0.002		0.039***
h = 10	(0.002)		(0.002)		(0.001)		(0.003)		(0.004)		(0.014)
h = 30	0.001		0.003		−0.001		0.004		0.002		0.039***
h = 30	(0.001)		(0.002)		(0.001)		(0.003)		(0.004)		(0.013)
h = 60	0.014		0.004		−0.001		0.004		0.002		0.038***
h = 60	(0.009)		(0.002)		(0.001)		(0.002)		(0.004)		(0.013)
h = 120	0.033***		0.003		−0.001		0.004		0.001		0.036***
h = 120	(0.012)		(0.002)		(0.001)		(0.002)		(0.004)		(0.012)

Historical average (HA) versus Brent
	Global		Europe		US		Asia		Solar		Wind
RMSE	HA	Brent	HA	Brent	HA	Brent	HA	Brent	HA	Brent	HA	Brent
h = 10	0.919	0.919	1.278	1.278	1.147	1.147	1.297	1.297	1.760	1.760	1.187	1.175
h = 30	0.921	0.921	1.275	1.274	1.146	1.146	1.295	1.294	1.757	1.758	1.186	1.174
h = 60	1.048	1.042	1.270	1.270	1.143	1.143	1.289	1.288	1.757	1.758	1.191	1.180
h = 120	1.114	1.104	1.258	1.257	1.134	1.134	1.280	1.279	1.751	1.751	1.180	1.169
CW	HA	Brent	HA	Brent	HA	Brent	HA	Brent	HA	Brent	HA	Brent
h = 10	0.001		0.003		−0.001		0.004		0.002		0.039***
h = 10	(0.002)		(0.002)		(0.001)		(0.003)		(0.004)		(0.014)
h = 30	0.001		0.003		−0.001		0.004		0.002		0.039***
h = 30	(0.001)		(0.002)		(0.001)		(0.003)		(0.004)		(0.013)
h = 60	0.014		0.004		−0.001		0.004		0.002		0.038***
h = 60	(0.009)		(0.002)		(0.001)		(0.002)		(0.004)		(0.013)
h = 120	0.033***		0.003		−0.001		0.004		0.001		0.036***
h = 120	(0.012)		(0.002)		(0.001)		(0.002)		(0.004)		(0.012)

Historical average (HA) versus WTI
	Global		Europe		US		Asia		Solar		Wind
RMSE	HA	WTI	HA	WTI	HA	WTI	HA	WTI	HA	WTI	HA	WTI
h = 10	0.919	0.917	1.278	1.276	1.147	1.145	1.297	1.296	1.760	1.759	1.187	1.166
h = 30	0.921	0.919	1.275	1.272	1.146	1.144	1.295	1.293	1.757	1.756	1.186	1.166
h = 60	1.048	1.037	1.270	1.268	1.143	1.141	1.289	1.287	1.757	1.757	1.191	1.172
h = 120	1.114	1.100	1.258	1.255	1.134	1.132	1.280	1.278	1.751	1.750	1.180	1.162
CW	HA	WTI	HA	WTI	HA	WTI	HA	WTI	HA	WTI	HA	WTI
h = 10	0.006**		0.009**		0.006**		0.007**		0.009		0.070***
h = 10	(0.003)		(0.004)		(0.002)		(0.003)		(0.007)		(0.024)
h = 30	0.006**		0.010**		0.006**		0.007**		0.010		0.069***
h = 30	(0.003)		(0.004)		(0.002)		(0.003)		(0.007)		(0.024)
h = 60	0.026*		0.010**		0.005**		0.007**		0.009		0.067***
h = 60	(0.014)		(0.004)		(0.002)		(0.003)		(0.007)		(0.023)
h = 120	0.046***		0.010**		0.005**		0.007**		0.009		0.063***
h = 120	(0.017)		(0.004)		(0.002)		(0.003)		(0.007)		(0.022)

Historical average (HA) versus WTI
	Global		Europe		US		Asia		Solar		Wind
RMSE	HA	WTI	HA	WTI	HA	WTI	HA	WTI	HA	WTI	HA	WTI
h = 10	0.919	0.917	1.278	1.276	1.147	1.145	1.297	1.296	1.760	1.759	1.187	1.166
h = 30	0.921	0.919	1.275	1.272	1.146	1.144	1.295	1.293	1.757	1.756	1.186	1.166
h = 60	1.048	1.037	1.270	1.268	1.143	1.141	1.289	1.287	1.757	1.757	1.191	1.172
h = 120	1.114	1.100	1.258	1.255	1.134	1.132	1.280	1.278	1.751	1.750	1.180	1.162
CW	HA	WTI	HA	WTI	HA	WTI	HA	WTI	HA	WTI	HA	WTI
h = 10	0.006**		0.009**		0.006**		0.007**		0.009		0.070***
h = 10	(0.003)		(0.004)		(0.002)		(0.003)		(0.007)		(0.024)
h = 30	0.006**		0.010**		0.006**		0.007**		0.010		0.069***
h = 30	(0.003)		(0.004)		(0.002)		(0.003)		(0.007)		(0.024)
h = 60	0.026*		0.010**		0.005**		0.007**		0.009		0.067***
h = 60	(0.014)		(0.004)		(0.002)		(0.003)		(0.007)		(0.023)
h = 120	0.046***		0.010**		0.005**		0.007**		0.009		0.063***
h = 120	(0.017)		(0.004)		(0.002)		(0.003)		(0.007)		(0.022)

Note(s): This table presents the results for the forecast evaluation of the oil risk based models where either the realized volatility of WTI or Brent price serve as the predictor. The forecast evaluation analysis compares the oil risk-based models with the HA model given that we are dealing with the return series of the clean energy prices. The oil risk-based models and HA model are “nested” since the latter can be seen as a subset of the former, hence the choice of Clark and West as the forecast evaluation test. The rejection of the null hypothesis of the Clark and West test indicates the better performance of the preferred models. “*”, “**” and “***” indicates statistical significance at the 10%, 5% and 1% significance levels

Source(s): Table by authors

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