An empirical analysis of uranium spot price

The objective of this study is to empirically test a market model of the of the uranium industry that incorporates the notion that if the resource is viewed as an asset by economic agents then its own rate of return along with the own rate of return of a competing asset would be a major factor in formulating the price of the resource.;The model tested in this study is based on a market model of supply and demand. The supply model incorporates the notion that the decision criteria used by uranium mine owners is to select that extraction rate which maximizes the net present value of their extraction receipts. The demand model uses a concept that allows for explicit recognition of the prospect of arbitrage between a natural resource market and the market for other capital goods. The empirical approach used for estimation was a recursive or causal model.;The empirical results were consistent with the theoretical models. The coefficients of the demand and supply equations had the appropriate signs. Tests for causality were conducted to validate the use of the causal model. The results obtained were favorable.;The implication of the findings of this research as it relates to future studies of exhaustible resources are: (1) In some cases causal models are the appropriate specification for empirical analysis; (2) Supply models should incorporate a measure to capture depletion effects.