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RSS FeedsSustainability, Vol. 11, Pages 2843: Application of Wavelet-Based Maximum Likelihood Estimator in Measuring Market Risk for Fossil Fuel (Sustainability)

 
 

18 may 2019 15:02:41

 
Sustainability, Vol. 11, Pages 2843: Application of Wavelet-Based Maximum Likelihood Estimator in Measuring Market Risk for Fossil Fuel (Sustainability)
 




Energy commodity prices are inherently volatile, since they are determined by the volatile global demand and supply of fossil fuel extractions, which in the long-run will affect the observed climate patterns. Measuring the risk associated with energy price changes, therefore, ultimately provides us with an important tool to study the economic drivers of climate changes. This study examines the potential use of long-memory estimation methods in capturing such risk. In particular, we are interested in investigating the energy markets’ efficiency at the aggregated level, using a novel wavelet-based maximum likelihood estimator (waveMLE). We first compare the performance of various conventional estimators with this new method. Our simulated results show that waveMLE in general outperforms these previously well-established estimators. Additionally, we document that while energy returns realizations follow a white-noise and are generally independent, volatility processes exhibits a certain degree of long-range dependence.


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57 viewsCategory: Ecology
 
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