Extracting Knowledge from Technical Reports for the Valuation of West Texas Intermediate Crude Oil Futures

Extracting Knowledge from Technical Reports for the Valuation of West Texas Intermediate Crude... This paper proposes and demonstrates an approach for the often-attempted problem of market prediction, framed as classification task. We restrict our study to a widely purchased and well recognized commodity, West Texas Intermediate crude oil, which experiences significant volatility. For this purpose, nine learners using features extracted from monthly International Energy Agency (IEA) reports to predict undervalued, overvalued, and accurate valuation of the oil futures between 2003 and 2015. The often touted “Efficient Market Hypothesis” (EMH) suggests that it is impossible for individual investors to “beat the market” as market and external forces, such as geopolitical crises and natural disasters, are nearly impossible to predict. However, four algorithms were statistically better at the 95% confidence interval than “Zero-Rule” and “Random-Guess” strategies which are expected to pseudo-reflect the EMH. Furthermore, the addition of text features can significantly improve performance compared to only using price history from the oil futures data, challenging the validity of the semi-strong versions of the EMH in the crude oil market. Keywords Machine learning · Text mining · Crude oil market 1 Introduction or selling assets (Fama 1970). Because each individual investor uses a rational decision making process when purchasing or selling assets, the cumulative sum http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Information Systems Frontiers Springer Journals

Extracting Knowledge from Technical Reports for the Valuation of West Texas Intermediate Crude Oil Futures

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Publisher
Springer US
Copyright
Copyright © 2018 by Springer Science+Business Media, LLC, part of Springer Nature
Subject
Business and Management; IT in Business; Management of Computing and Information Systems; Systems Theory, Control; Operations Research/Decision Theory
ISSN
1387-3326
eISSN
1572-9419
D.O.I.
10.1007/s10796-018-9859-2
Publisher site
See Article on Publisher Site

Abstract

This paper proposes and demonstrates an approach for the often-attempted problem of market prediction, framed as classification task. We restrict our study to a widely purchased and well recognized commodity, West Texas Intermediate crude oil, which experiences significant volatility. For this purpose, nine learners using features extracted from monthly International Energy Agency (IEA) reports to predict undervalued, overvalued, and accurate valuation of the oil futures between 2003 and 2015. The often touted “Efficient Market Hypothesis” (EMH) suggests that it is impossible for individual investors to “beat the market” as market and external forces, such as geopolitical crises and natural disasters, are nearly impossible to predict. However, four algorithms were statistically better at the 95% confidence interval than “Zero-Rule” and “Random-Guess” strategies which are expected to pseudo-reflect the EMH. Furthermore, the addition of text features can significantly improve performance compared to only using price history from the oil futures data, challenging the validity of the semi-strong versions of the EMH in the crude oil market. Keywords Machine learning · Text mining · Crude oil market 1 Introduction or selling assets (Fama 1970). Because each individual investor uses a rational decision making process when purchasing or selling assets, the cumulative sum

Journal

Information Systems FrontiersSpringer Journals

Published: May 30, 2018

References

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