Fundamentals and US natural gas price dynamics

Xiaoyan Qin, David Bessler (), David Leatham (), Ximing Wu () and Li Gan ()

No 56501, 2010 Annual Meeting, February 6-9, 2010, Orlando, Florida from Southern Agricultural Economics Association

Abstract: Investigation into the relations between market fundamentals and US natural gas prices is carried out in the regime-switching framework. To test the hypothesis that US natural gas market may switch between two states of market: bullish market and bearish market, a 2-state regime-switching model with Markov transition chain is carried out. GARCH effects are also built into the model to account for the conditional heteroskedasticity. Short-term forecasts based on the regime-switching model are also provided. Empirical results suggest that real world natural gas price behavior is far more complicated than that predicted by fundamental models. Volatility which cannot be explained by fundamentals plays an essential role in natural gas price behavior. The major contribution of this study lies in the effort to ease the deficiency of current fundamental-based models on commodity pricing due to high volatility by applying regime-switching models.

Keywords: Resource/Energy; Economics; and; Policy (search for similar items in EconPapers)
Pages: 26
Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://ageconsearch.umn.edu/record/56501/files/SAEA_Selected_Paper_2010_qin.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:saea10:56501

DOI: 10.22004/ag.econ.56501

Access Statistics for this paper

More papers in 2010 Annual Meeting, February 6-9, 2010, Orlando, Florida from Southern Agricultural Economics Association Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().