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Arbitrage Returns on the MISO Exchange

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  • Kevin Jones

    (Marilyn Davies College of Business, University of Houston-Downtown, 320 N. Main Street, Houston, TX 77002, USA)

Abstract

This paper examines arbitrage opportunities available in one of the largest wholesale electricity markets in the world, the Midcontinent Independent System Operator (MISO) electricity exchange. While prior research suggests that market efficiency on the exchange has increased over time, this study reveals that historical pricing information can still be used to generate positive returns. I find that a trading rule based on prior spot and forward prices generates statistically and economically significant risk-adjusted returns across the entire MISO footprint. These returns may in part be explained by the relatively small number of financial traders in the market and the ability of generation owners to exercise market power.

Suggested Citation

  • Kevin Jones, 2025. "Arbitrage Returns on the MISO Exchange," JRFM, MDPI, vol. 18(7), pages 1-10, June.
    • Handle: RePEc:gam:jjrfmx:v:18:y:2025:i:7:p:355-:d:1690411
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    References listed on IDEAS

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    2. Ali Hortaçsu & Steven L. Puller, 2008. "Understanding strategic bidding in multi‐unit auctions: a case study of the Texas electricity spot market," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 86-114, March.
    3. Haugom, Erik & Ullrich, Carl J., 2012. "Market efficiency and risk premia in short-term forward prices," Energy Economics, Elsevier, vol. 34(6), pages 1931-1941.
    4. Michelfelder, Richard A. & Pilotte, Eugene A., 2020. "Information in Electricity Forward Prices," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 55(8), pages 2641-2664, December.
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