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A Novel Multiscale Ensemble Carbon Price Prediction Model Integrating Empirical Mode Decomposition, Genetic Algorithm and Artificial Neural Network

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Author(s): Bangzhu Zhu

Journal: Energies
ISSN 1996-1073

Volume: 5;
Issue: 2;
Start page: 355;
Date: 2012;
Original page

Keywords: carbon price | multiscale prediction | empirical mode decomposition | artificial neural network | genetic algorithm | partial autocorrelation function

ABSTRACT
Due to the movement and complexity of the carbon market, traditional monoscale forecasting approaches often fail to capture its nonstationary and nonlinear properties and accurately describe its moving tendencies. In this study, a multiscale ensemble forecasting model integrating empirical mode decomposition (EMD), genetic algorithm (GA) and artificial neural network (ANN) is proposed to forecast carbon price. Firstly, the proposed model uses EMD to decompose carbon price data into several intrinsic mode functions (IMFs) and one residue. Then, the IMFs and residue are composed into a high frequency component, a low frequency component and a trend component which have similar frequency characteristics, simple components and strong regularity using the fine-to-coarse reconstruction algorithm. Finally, those three components are predicted using an ANN trained by GA, i.e., a GAANN model, and the final forecasting results can be obtained by the sum of these three forecasting results. For verification and testing, two main carbon future prices with different maturity in the European Climate Exchange (ECX) are used to test the effectiveness of the proposed multiscale ensemble forecasting model. Empirical results obtained demonstrate that the proposed multiscale ensemble forecasting model can outperform the single random walk (RW), ARIMA, ANN and GAANN models without EMD preprocessing and the ensemble ARIMA model with EMD preprocessing.
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