Fundamentals and US natural gas price dynamics
AbstractInvestigation into the relations between market fundamentals and US natural gas prices is carried out in the regime-switching framework. To test the hypothesis that US natural gas market may switch between two states of market: bullish market and bearish market, a 2-state regime-switching model with Markov transition chain is carried out. GARCH effects are also built into the model to account for the conditional heteroskedasticity. Short-term forecasts based on the regime-switching model are also provided. Empirical results suggest that real world natural gas price behavior is far more complicated than that predicted by fundamental models. Volatility which cannot be explained by fundamentals plays an essential role in natural gas price behavior. The major contribution of this study lies in the effort to ease the deficiency of current fundamental-based models on commodity pricing due to high volatility by applying regime-switching models.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Southern Agricultural Economics Association in its series 2010 Annual Meeting, February 6-9, 2010, Orlando, Florida with number 56501.
Date of creation: 2010
Date of revision:
US natural gas price behaviors; Markov-switching model; GARCH; Resource /Energy Economics and Policy;
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).
If references are entirely missing, you can add them using this form.