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Unit Root Behavior in Energy Futures Prices

Apostolos Serletis

Year: 1992
Volume: Volume 13
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol13-No2-6
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Abstract:
This paper re-examines the empirical evidence for random walk type behavior in energy futures prices. In doing so, tests for unit roots in the univariate time-series representation of the daily crude oil, heating oil, and unleaded gasoline series are performed using recent state-of-the-art methodology. The results show that the unit root hypothesis can be rejected if allowance is made for the possibility of a one-time break in the intercept and the slope of the trend function at an unknown point in time.



Business Cycles and the Behavior of Energy Prices

Apostolos Serletis and Vaughn Hullernan

Year: 1994
Volume: Volume15
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol15-No2-7
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Abstract:
This paper tests the theory of storage-the hypothesis that the marginal convenience yield on inventory falls at a decreasing rate as inventory increases in energy markets (crude oil, heating oil, and unleaded gas markets). We use the Fama and French (1988) indirect test, based on the relative variation in spot and futures prices. The results suggest that the theory holds for the energy markets.



Nonlinear Dynamics in Energy Futures

Mariano Matilla-García

Year: 2007
Volume: Volume 28
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No3-2
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Abstract:
This paper studies the possible nonlinear and chaotic nature of three energy futures: natural gas, unleaded gasoline and light crude oil. Nonlinearity is analyzed using the generalized BDS statistic, along with Kaplan�s test. The results show that nonlinearity cannot be rejected. The null hypothesis of chaos is then investigated via the stability of the largest Lyapunov exponent. Evidence of chaos is found in futures returns. Global modelling techniques, like genetic algorithms, have been used in order to estimate potential motion equations. In addition, short term forecasts in futures price movements have been conducted with these estimated equations. The results show that although forecast errors are statistically smaller than those computed with other stochastic approaches, further research on these topics needs to be done.



The Impact of Stochastic Extraction Cost on the Value of an Exhaustible Resource: An Application to the Alberta Oil Sands

Abdullah Almansour and Margaret Insley

Year: 2016
Volume: Volume 37
Number: Number 2
DOI: 10.5547/01956574.37.2.aalm
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Abstract:
The optimal management of a non-renewable resource extraction project is studied when input and output prices follow correlated stochastic processes. The decision problem is specified by two Bellman equations describing the project when it is currently operating or mothballed. Solutions are determined numerically using the Least Squares Monte Carlo methodology. The analysis is applied to an oil sands project which uses natural gas during extracting and upgrading. The paper takes into account the co-movement between crude oil and natural gas prices and proposes two price models: one incorporates a long-run link between the two while the other has no such link. Incorporating a long-run relationship between oil and natural gas prices has a significant effect on the value of the project and its optimal operation and reduces the sensitivity of the project to the natural gas price process.





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