Abstract
This study advances the research on the convenience yield of natural gas. Econometric models confirm that air temperature is an important explanatory variable in addition to storage levels. Furthermore, an extended linear model shows that one has to account for a changing cost of physical storage in the spirit of Brennan (1958). Besides this, an alternative regime-switching model for the convenience yield helps to put in perspective a prominent finding by Fama, and French (1987). That is, given binding capacity constraints for gas storage, the variance of the futures' basis will increase rather than decrease with the storage levels. Finally and most importantly, robustness tests demonstrate that the extended linear model produces the most viable forecasts and that these forecasts can help to amend the performance of reduced-form models for the gas spot price. © 2010 Wiley Periodicals, Inc. Jrl Fut Mark
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
