On Jumps and ARCH Effects in Natural Resource Prices. An Application to Stumpage Prices from Pacific Northwest National Forests
Models 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.
|Date of creation:||2000|
|Date of revision:|
|Contact details of provider:|| Postal: Bureau 2245, Pavillon J.-A.-DeSève, Québec (Québec) G1K 7P4|
Phone: (418) 656-2096
Fax: (418) 656-7412
Web page: http://www.green.ecn.ulaval.ca
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:lvl:lagrcr:0003. See general 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: (Manuel Paradis)
If references are entirely missing, you can add them using this form.