Beating the naive: Combining LASSO with naive intraday electricity price forecasts

A recent electricity price forecasting study claims that the German intraday, continuous-time market for hourly products is weak-form efficient, i.e., that the best predictor for the so-called ID3-Price index is the most recent transaction price. Here, we undermine this claim and show that we can beat the naive forecast by combining it with a prediction of a parameter-rich model estimated using the least absolute shrinkage and selection operator (LASSO). We further argue, that that if augmented with timely predictions of fundamental variables for the coming hours, the LASSO-estimated model itself can significantly outperform the naive forecast.