Natural-gas futures: Bias, predictive performance, and the theory of storage [An article from: Energy Economics]

This digital document is a journal article from Energy Economics, published by Elsevier in 2005. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
This study reports several empirical findings concerning natural gas futures prices. First, spot and futures prices are non-stationary and the observed trends are due to positive drifts in the random-walk components of the prices rather than possible deterministic time trends. Second, market forecast errors are stationary. Third, futures are less than expected future spot prices so that futures are backwardated. Fourth, the bias in the futures prices is time varying. Fifth, futures have statistically significant market-timing ability, despite the bias in the magnitude forecasts. Finally, the data lends partial support to the cost-of-carry theory of the basis determination.