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Predictive Performance and Bias: Evidence from Natural Gas Markets

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  • Thomas Kremser
  • Margarethe Rammerstorfer

Abstract

This paper sheds light on the differences and similarities in natural gas trading at the National Balancing Point in the UK and the Henry Hub located in the US. For this, we analyze traders¡¯ expectations and implement a mechanical forecasting model that allows traders to predict future spot prices. Based on this, we compute the deviations between expected and realized spot prices and analyze possible reasons and dependencies with other market variables. Overall, the mechanical predictor performs well, but a small forecast error remains which can not be characterized by the explanatory variables included.

Suggested Citation

  • Thomas Kremser & Margarethe Rammerstorfer, 2017. "Predictive Performance and Bias: Evidence from Natural Gas Markets," Journal of Management and Sustainability, Canadian Center of Science and Education, vol. 7(2), pages 1-26, June.
    • Handle: RePEc:ibn:jmsjnl:v:7:y:2017:i:2:p:1-26
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    References listed on IDEAS

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    More about this item

    Keywords

    natural gas; commodity pricing; unbiasedness; Kalman filtering; risk premium;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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