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Risk Premiums and Efficiency in the Market for Crude Oil Futures

Richard Deaves and Itzhak Krinsky

Year: 1992
Volume: Volume 13
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol13-No2-5
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Abstract:
The New York Mercantile Exchange's Crude Oil futures contract is investigated for the existence and nature of risk premiums and informational efficiency. During 1983-90, there is some evidence that short-term premiums were positive and covaried with recent volatility. As for efficiency, we find nothing inconsistent with weak-form efficiency, but some apparent violations cf semi-strong efficiency. We argue that, for a number of reasons, such rejections should be interpreted with caution.



The Informational Efficiency of European Natural Gas Hubs: Price Formation and Intertemporal Arbitrage

Sebastian Nick

Year: 2016
Volume: Volume 37
Number: Number 2
DOI: 10.5547/01956574.37.2.snic
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Abstract:
In this study, the informational efficiency of the European natural gas market is analyzed by empirically investigating price formation and arbitrage efficiency between spot and futures markets. Econometric approaches accounting for nonlinearities induced by the low liquidity-framework and by technical constraints of the considered gas hubs are specified. The empirical results reveal that price discovery generally takes place on the futures market. Thus, the futures market seems to be more informationally efficient than the spot market. The theory of storage seems to hold at all hubs in the long run. There is empirical evidence of significant market frictions hampering intertemporal arbitrage. UK's NBP and Austria's CEGH seem to be the hubs at which arbitrage opportunities are exhausted most efficiently, although there is convergence in the degree of intertemporal arbitrage efficiency over time at the hubs investigated.



Ontario's Auction Market for Financial Transmission Rights: An Analysis of its Efficiency

Derek E. H. Olmstead

Year: 2018
Volume: Volume 39
Number: Number 1
DOI: 10.5547/01956574.39.1.dolm
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Abstract:
Financial transmission rights (FTR) are financial products that entitle their holder to receive a payment based on the degree of congestion in a transmission system. In many liberalized electricity markets, FTR are sold at auction by the local electricity system operator. This paper addresses several questions about the performance of FTR auctions in Ontario's restructured electricity market, including whether auction market clearing prices approximate realized payouts and whether there is any evidence that the competitiveness of auctions, as measured by the number of bidders, affects the forward market unbiasedness or informational efficiency of the auctions. The paper finds that the auction process is inefficient in the sense that market clearing prices are substantially and systematically lower than realized payouts, resulting in substantial transfers away from consumers. However, there is some evidence that the auction market is more efficient when there are three or more bidders.





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