A test of Hotelling’s Valuation Principle for nonrenewable resources

A recent study by Cairns and Davis (1998) tested and rejected the Hotelling Valuation Principle (HVP) using cross-sectional data on gold mines. But a replication of that study using the same data suggests the presence of heteroscedastic errors. In contrast to the results of ordinary least squares regressions, robust estimation and weighted least squares results indicate that the HVP may not be rejected at conventional levels of significance. Moreover, the alternative valuation equations proposed by Cairns and Davis can require additional and often unavailable information regarding mineral production. Matched pairs tests indicate that prediction accuracy is roughly comparable across all of the equations examined. [PUBLICATION ABSTRACT]