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A conditionally heteroskedastic model with time-varying coefficients for daily gas spot prices

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  • Regnard, Nazim
  • Zakoian, Jean-Michel

Abstract

A novel GARCH(1,1) model, with coefficients function of the realizations of an exogenous process, is considered for the volatility of daily gas prices. A distinctive feature of the model is that it produces non-stationary solutions. The probability properties, and the convergence and asymptotic normality of the Quasi-Maximum Likelihood Estimator (QMLE) have been derived by Regnard and Zakoian (2009). The prediction properties of the model are considered. We derive a strongly consistent estimator of the asymptotic variance of the QMLE. An application to daily gas spot prices from the Zeebruge market is presented. Apart from conditional heteroskedasticity, an empirical finding is the existence of distinct volatility regimes depending on the temperature level.

Suggested Citation

  • Regnard, Nazim & Zakoian, Jean-Michel, 2010. "A conditionally heteroskedastic model with time-varying coefficients for daily gas spot prices," MPRA Paper 22642, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:22642
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    Cited by:

    1. Nick, Sebastian & Thoenes, Stefan, 2014. "What drives natural gas prices? — A structural VAR approach," Energy Economics, Elsevier, vol. 45(C), pages 517-527.
    2. Hulshof, Daan & van der Maat, Jan-Pieter & Mulder, Machiel, 2016. "Market fundamentals, competition and natural-gas prices," Energy Policy, Elsevier, vol. 94(C), pages 480-491.
    3. Ruszel, Mariusz, 2020. "The significance of the Baltic Sea Region for natural gas supplies to the V4 countries," Energy Policy, Elsevier, vol. 146(C).
    4. Ivan Aleksandrovich Kopytin & Alexander Oskarovich Maslennikov & Stanislav Vyacheslavovich Zhukov, 2022. "Europe in World Natural Gas Market: International Transmission of European Price Shocks," International Journal of Energy Economics and Policy, Econjournals, vol. 12(3), pages 8-15, May.
    5. Zhang, Dayong & Wang, Tiantian & Shi, Xunpeng & Liu, Jia, 2018. "Is hub-based pricing a better choice than oil indexation for natural gas? Evidence from a multiple bubble test," Energy Economics, Elsevier, vol. 76(C), pages 495-503.
    6. Rajae Azrak & Guy Mélard, 2022. "Autoregressive Models with Time-Dependent Coefficients—A Comparison between Several Approaches," Stats, MDPI, vol. 5(3), pages 1-21, August.
    7. Aknouche Abdelhakim & Demmouche Nacer & Dimitrakopoulos Stefanos & Touche Nassim, 2020. "Bayesian analysis of periodic asymmetric power GARCH models," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 24(4), pages 1-24, September.
    8. Abdelhakim Aknouche, 2017. "Periodic autoregressive stochastic volatility," Statistical Inference for Stochastic Processes, Springer, vol. 20(2), pages 139-177, July.
    9. Kirat, Yassine, 2021. "The US shale gas revolution: An opportunity for the US manufacturing sector?," International Economics, Elsevier, vol. 167(C), pages 59-77.
    10. Aknouche, Abdelhakim & Demmouche, Nacer & Touche, Nassim, 2018. "Bayesian MCMC analysis of periodic asymmetric power GARCH models," MPRA Paper 91136, University Library of Munich, Germany.
    11. Aknouche, Abdelhakim, 2013. "Periodic autoregressive stochastic volatility," MPRA Paper 69571, University Library of Munich, Germany, revised 2015.
    12. Aknouche, Abdelhakim & Al-Eid, Eid & Demouche, Nacer, 2016. "Generalized quasi-maximum likelihood inference for periodic conditionally heteroskedastic models," MPRA Paper 75770, University Library of Munich, Germany, revised 19 Dec 2016.
    13. Akcora, Begum & Kandemir Kocaaslan, Ozge, 2023. "Price bubbles in the European natural gas market between 2011 and 2020," Resources Policy, Elsevier, vol. 80(C).
    14. Nazim Regnard & Jean‐Michel Zakoïan, 2010. "Structure and estimation of a class of nonstationary yet nonexplosive GARCH models," Journal of Time Series Analysis, Wiley Blackwell, vol. 31(5), pages 348-364, September.
    15. Tao, Hu & Zhuang, Shan & Xue, Rui & Cao, Wei & Tian, Jinfang & Shan, Yuli, 2022. "Environmental Finance: An Interdisciplinary Review," Technological Forecasting and Social Change, Elsevier, vol. 179(C).
    16. Yassine Kirat, 2021. "The US shale gas revolution: An opportunity for the US manufacturing sector?," Post-Print hal-03676616, HAL.
    17. Wang, Tiantian & Qu, Wan & Zhang, Dayong & Ji, Qiang & Wu, Fei, 2022. "Time-varying determinants of China's liquefied natural gas import price: A dynamic model averaging approach," Energy, Elsevier, vol. 259(C).
    18. Abdelhakim Aknouche & Eid Al-Eid & Nacer Demouche, 2018. "Generalized quasi-maximum likelihood inference for periodic conditionally heteroskedastic models," Statistical Inference for Stochastic Processes, Springer, vol. 21(3), pages 485-511, October.

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    More about this item

    Keywords

    GARCH; Gas prices; Nonstationary models; Periodic models; Quasi-maximum likelihood estimation; Time-varying coefficients;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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