 The Stochastic Seasonal Behaviour of Natural Gas PricesAndrés GarcÃa Mirantes, Javier Población and Gregorio Serna European Financial Management, 2012, vol. 18, issue 3, 410-443 Abstract: Previous studies have explored the seasonal behaviour of commodity prices as a deterministic factor. This paper goes further by proposing a general (n+2m)†factor model for the stochastic behaviour of commodity prices, which nests the deterministic seasonal model by Sorensen (2002). We consider seasonality as a stochastic factor, with n non†seasonal and m seasonal factors. The non†seasonal factors are as defined in Schwartz (1997), Schwartz and Smith (2000) and Cortazar and Schwartz (2003). The seasonal factors are trigonometric components generated by stochastic processes. The model has been applied to the Henry Hub natural gas futures contracts listed by NYMEX. We find that models allowing for stochastic seasonality outperform standard models with deterministic seasonality. We obtain similar results with other energy commodities. Moreover, we find that stochastic seasonality implies that the volatility of futures returns follows a seasonal pattern. This result has important implications in terms of option pricing. Date: 2012 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:eufman:v:18:y:2012:i:3:p:410-443 Ordering information: This journal article can be ordered from Access Statistics for this article European Financial Management is currently edited by John Doukas More articles in European Financial Management from European Financial Management Association Contact information at EDIRC. |
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