Christian Huurman () (Financial Engeneering Associates) Francesco Ravazzolo () (Norges Bank (Central Bank of Norway)) Chen Zhou () (Erasmus University, Amsterdam)
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This paper examines the predictive power of weather for electricity prices in day-ahead markets in real time. We find that next-day weather forecasts improve the forecast accuracy of day-ahead electricity prices substantially, suggesting that weather forecasts can price the weather premium. Moreover, we find that the predictive power of weather forecasts for electricity prices can be further exploited by allowing for non-linear effects of the weather forecasts.
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Paper provided by Norges Bank in its series Working Paper with number
2008/08.
Find related papers by JEL classification: C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Other Model Applications G15 - Financial Economics - - General Financial Markets - - - International Financial Markets Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General