On Jumps and ARCH Effects in Natural Resource Prices. An Application to Stumpage Prices from Pacific Northwest National Forests
AbstractModels use for natural resources prices usually preclude the possibility of large changes (jumps) resulting from discrete, unexpected events. To test for the presence of jumps and ARCH effects, we propose to use bounds and bootstrap test techniques, thus solving the unidentified nuisance parameter problem. We apply this approach to stumpage price time series from the Pacific Northwest and find evidence of jumps and ARCH effects. Using real options, we then develop a stopping model to assess the impact of neglecting jumps on the decision to harvest old-growth timber. Our numerical results show the importance of modeling jumps explicitly.
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Bibliographic InfoPaper provided by GREEN in its series Cahiers de recherche with number 0003.
Date of creation: 2000
Date of revision:
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Jum Processes; ARCH; Bootstrap; Stumpage Prices; Real Options;
Other versions of this item:
- Saphores, J.D. & Khalaf, L. & Pelletier, D., 2000. "On Jumps and ARCH Effects in Natural Resource Prices. An Application to Stumpage Prices from Pacific Northwest National Forests," Papers, Laval - Recherche en Energie 00-03, Laval - Recherche en Energie.
- Saphores, Jean-Daniel & Khalaf, Lynda & Pelletier, Denis, 2000. "On Jumps and Arch Effects in Natural Resource Prices. An Application to Stumpage Prices from Pacific Northwest National Forests," Cahiers de recherche, UniversitÃ© Laval - DÃ©partement d'Ã©conomique 0003, UniversitÃ© Laval - DÃ©partement d'Ã©conomique.
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
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- Jean-Thomas Bernard & Lynda Khalaf & Maral Kichian, 2004. "Structural Change and Forecasting Long-Run Energy Prices," Working Papers 04-5, Bank of Canada.
- Jean-Thomas Bernard & Lynda Khalaf & Maral Kichian & Sebastien McMahon, 2006.
"Forecasting Commodity Prices: GARCH, Jumps, and Mean Reversion,"
06-14, Bank of Canada.
- Jean-Thomas Bernard & Lynda Khalaf & Maral Kichian & Sebastien Mcmahon, 2008. "Forecasting commodity prices: GARCH, jumps, and mean reversion," Journal of Forecasting, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 27(4), pages 279-291.
- Hultkrantz, Lars & Andersson, Linda & Mantalos, Panagiotis, 2014. "Stumpage prices in Sweden 1909â€“2012: Testing for non-stationarity," Journal of Forest Economics, Elsevier, Elsevier, vol. 20(1), pages 33-46.
- Lee, Yen-Hsien & Hu, Hsu-Ning & Chiou, Jer-Shiou, 2010. "Jump dynamics with structural breaks for crude oil prices," Energy Economics, Elsevier, Elsevier, vol. 32(2), pages 343-350, March.
- Khalaf, Lynda & Kichian, Maral, 2005. "Exact tests of the stability of the Phillips curve: the Canadian case," Computational Statistics & Data Analysis, Elsevier, Elsevier, vol. 49(2), pages 445-460, April.
- Khalaf, Lynda & Saphores, Jean-Daniel & Bilodeau, Jean-Francois, 2003. "Simulation-based exact jump tests in models with conditional heteroskedasticity," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 28(3), pages 531-553, December.
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