Date of Award
Asset pricing, Hotelling, Natural resources, Oil and gas
The Hotelling Valuation Principal (HVP) implies that the value per unit of an in-ground exhaustible natural resource is equal to the current price less the cost of production. The assumptions required for this principle include a certain and homogenous reserve stock, unconstrained extraction, and constant costs. Extensive research has empirically investigated the HVP. This paper expands the HVP framework and relaxes the theory’s assumptions to account for reserve differentials. The results show that the original net price model is more closely aligned with developed reserve value, than total reserve value. In addition, this paper develops two- and three-factor net price models to incorporate user cost, extraction capacity and the risk of developing and producing oil and gas reserves.
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Hicks, Brian K., "The Hotelling Valuation Principle: Does User Cost and Reserve Differentials Improve Validity?" (2021). Electronic Theses and Dissertations. 1943.
Received from ProQuest
Brian K. Hicks