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Electricity Sales and Forecasting of Stock Market Realized Volatility: A State-Level Analysis of the United States

Author

Listed:
  • Matteo Bonato

    (Department of Economics and Econometrics, University of Johannesburg, Auckland Park, South Africa; IPAG Business School, 184 Boulevard Saint-Germain, 75006 Paris, France; B-CCaS, University of Edinburgh Business School)

  • Oguzhan Cepni

    (Ostim Technical University, Ankara, Turkiye; University of Edinburgh Business School, Centre for Business, Climate Change, and Sustainability; Department of Economics, Copenhagen Business School, Denmark)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

  • Christian Pierdzioch

    (Department of Economics, Helmut Schmidt University, Holstenhofweg 85, P.O.B. 700822, 22008 Hamburg, Germany)

Abstract

We study the out-of-sample forecasting value of and state-level and market-wideoverall commercial, industrial, and residential electricity sales for monthly state-level (1995--2025) realized stock market volatility (RV) of the United States (U.S.). We control for state-level and market-wide realized moments (leverage, skewness, kurtosis, and tail risks). We estimate our forecasting models using a boosting algorithm, and two alternative statistical learning algorithms (forward best predictor selection and random forests). We find evidence that realized moments have predictive power for subsequent RV at forecast horizons up to one year in some model configurations, while evidence of predictive power of the growth rate of electricity sales, whether measured at state-level or at the market-level, is mixed and mainly concentrated, on average across states, at the short forecast horizon.

Suggested Citation

  • Matteo Bonato & Oguzhan Cepni & Rangan Gupta & Christian Pierdzioch, 2025. "Electricity Sales and Forecasting of Stock Market Realized Volatility: A State-Level Analysis of the United States," Working Papers 202540, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202540
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    References listed on IDEAS

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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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