Oil price forecasting with an EMD-based multiscale neural network learning paradigm

Abstract

In this study, a multiscale neural network learning paradigm based on empirical mode decomposition (EMD) is proposed for crude oil price prediction. In this learning paradigm, the original price series are first decomposed into various independent intrinsic mode components (IMCs) with a range of frequency scales. Then the internal correlation structures of different IMCs are explored by neural network model. With the neural network weights, some important IMCs are selected as final neural network inputs and some unimportant IMCs that are of little use in the mapping of input to output are discarded. Finally, the selected IMCs are input into another neural network model for prediction purpose. For verification, the proposed multiscale neural network learning paradigm is applied to a typical crude oil price - West Texas Intermediate (WTI) crude oil spot price prediction. © Springer-Verlag Berlin Heidelberg 2007.