| This thesis examines several different properties of natural gas prices and markets. Specifically, I address the form and functions of futures markets, the cyclical behaviour of natural gas prices (utilizing Prescott's (1986) methodology), tests on the theory of storage (utilizing Fama and French's (1988) methodology), and tests for market efficiency (utilizing Fama's (1984) methodology).;My analysis concludes that natural gas prices are weakly procyclical with output and lag the cycle by two periods. Moreover, natural gas prices, in general, tend to move in the same fashion as other energy commodity prices. Natural gas passes one of three tests of the theory of storage and this result is inconsistent with Serletis and Hulleman's work (1994) on energy prices and storage. Further, it appears that natural gas markets have operated in an efficient manner as the current futures price appears to have the power to predict the future spot price. However, I have uncovered evidence of time varying risk premium which is consistent with Serletis (1991) results with respect to heating oil, Fama and French's (1988) result with respect to metal prices, and finally, Cho and McDougall's (1990) results with respect to other energy prices. |
