Market efficiency and risk premia in short-term forward prices
AbstractUsing recursive estimation and rolling windows over extended sample periods we examine the time-varying relationship between spot and short-term forward prices in the Pennsylvania–New Jersey–Maryland (PJM) wholesale electricity market. We examine theoretical models of forward risk premia in electricity markets and show that recent data do not provide support for existing models. The results indicate that short-term forward prices have converged towards unbiased predictors of the subsequent spot prices.
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Bibliographic InfoArticle provided by Elsevier in its journal Energy Economics.
Volume (Year): 34 (2012)
Issue (Month): 6 ()
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Web page: http://www.elsevier.com/locate/eneco
Market efficiency; Unbiased forward rate hypothesis; Joint hypothesis problem; Forward prices; Electricity markets;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
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