A Reappraisal of Real‐Time Forecasts of the Real Price of Oil

Abstract: We replicate Baumeister and Kilian's work done in 2012 to reappraise real‐time forecasts of the real price of crude oil against the end‐of‐month no‐change forecast, the equivalent naive benchmark used for asset prices. We find no consistently significant improvements in the predictive accuracy of model‐based forecasts over this naive benchmark at short horizons. Only futures‐based forecasts consistently outperform the end‐of‐month no‐change forecast, and only at longer horizons. These results challenge the consensus on the predictability of the real price of crude oil and the merits of alternative forecast approaches. Our findings motivate broader reassessment and replication of forecasting models of temporally aggregated series.