December 11th, 2015, 8:17 am
I am making a VAR model to forcast future price. The factors include other commodity price, interest rate, FX rate, commodity storage and so on.I find most literature uses asset return as VAR input factors, but my back test result shows that if I directly use prices as input, the result looks much better.So, is there any principle to pick up VAR factors here? Or just by try and error.Thank you in advance.