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An empirical estimation for mean-reverting coal prices with long memory

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  • Sun, Qi
  • Xu, Weijun
  • Xiao, Weilin

Abstract

In this paper we discuss the calibration issues of power models built on mean-reverting processes combined with long memory. The unknown parameters of fractional mean-reversion processes are estimated by a hybrid estimation method, which is built upon the marriage of the quadratic variation and the least squares. We perform a simulation study to test the efficiency of these estimators and to compare with the approach proposed by Høg (1999). Moreover, we apply our estimation procedure to some sample series of Chinese coal spot prices in real life situations. These results support the use of fractional mean-reversion processes in modeling Chinese coal prices.

Suggested Citation

  • Sun, Qi & Xu, Weijun & Xiao, Weilin, 2013. "An empirical estimation for mean-reverting coal prices with long memory," Economic Modelling, Elsevier, vol. 33(C), pages 174-181.
    • Handle: RePEc:eee:ecmode:v:33:y:2013:i:c:p:174-181
    DOI: 10.1016/j.econmod.2013.04.015
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    3. Jonek Kowalska, Izabela, 2015. "Challenges for long-term industry restructuring in the Upper Silesian Coal Basin: What has Polish coal mining achieved and failed from a twenty-year perspective?," Resources Policy, Elsevier, vol. 44(C), pages 135-149.
    4. Chun Deng & Jie-Fang Dong, 2016. "Coal Consumption Reduction in Shandong Province: A Dynamic Vector Autoregression Model," Sustainability, MDPI, vol. 8(9), pages 1-16, August.
    5. Fernandes, Mário Correia & Dias, José Carlos & Nunes, João Pedro Vidal, 2021. "Modeling energy prices under energy transition: A novel stochastic-copula approach," Economic Modelling, Elsevier, vol. 105(C).
    6. Guangyong Zhang & Lixin Tian & Min Fu & Bingyue Wan & Wenbin Zhang, 2020. "Research on the Transmission Ability of China’s Thermal Coal Price Information Based on Directed Limited Penetrable Interdependent Network," Sustainability, MDPI, vol. 12(18), pages 1-23, September.
    7. Zhang, Pu & Xiao, Wei-lin & Zhang, Xi-li & Niu, Pan-qiang, 2014. "Parameter identification for fractional Ornstein–Uhlenbeck processes based on discrete observation," Economic Modelling, Elsevier, vol. 36(C), pages 198-203.

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    More about this item

    Keywords

    Energy model; Least squares estimation; Quadratic variations; Fractional mean-reversion processes; Monte Carlo simulation;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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