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The power of weather

Listed author(s):
  • Huurman, Christian
  • Ravazzolo, Francesco
  • Zhou, Chen

Weather information demonstrates predictive power in forecasting electricity prices in day-ahead markets in real time. In particular, next-day weather forecasts improve the forecast accuracy of Scandinavian day-ahead electricity prices in terms of point and density forecasts. This suggests that weather forecasts can price the weather premium on electricity prices. By augmenting with weather forecasts, GARCH-type time-varying volatility models statistically outperform specifications which ignore this information in density forecasting.

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File URL: http://www.sciencedirect.com/science/article/pii/S0167947310002665
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Article provided by Elsevier in its journal Computational Statistics & Data Analysis.

Volume (Year): 56 (2012)
Issue (Month): 11 ()
Pages: 3793-3807

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Handle: RePEc:eee:csdana:v:56:y:2012:i:11:p:3793-3807
DOI: 10.1016/j.csda.2010.06.021
Contact details of provider: Web page: http://www.elsevier.com/locate/csda

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