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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 Effects of Information on Residential Demand for Electricity

Isamu Matsukawa

Year: 2004
Volume: Volume 25
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol25-No1-1
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Abstract:
This paper measures the effects of information on residential demand for electricity, using data from a Japanese experiment. In the experiment, households had a continuous-display, electricity use monitoring device installed at their residence. The monitor was designed so that each consumer could easily look at graphs and tables associated with the consumer s own usage of electricity at any time during the experiment. The panel data were used to estimate a random effects model of electricity and count data models of monitor usage. The results indicate that monitor usage contributed to energy conservation.



Systematic Features of High-Frequency Volatility in Australian Electricity Markets: Intraday Patterns, Information Arrival and Calendar Effects

Helen Higgs and Andrew C. Worthington

Year: 2005
Volume: Volume 26
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol26-No4-2
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Abstract:
This paper investigates the intraday price volatility process in four Australian wholesale electricity markets; namely New South Wales, Queensland, South Australia and Victoria. The data set consists of half-hourly electricity prices and demand volumes over the period January 1, 2002 to June 1, 2003. A range of processes including GARCH, RiskMetrics, normal Asymmetric Power ARCH or APARCH, Student APARCH and skewed Student APARCH are used to model the time-varying variance in prices and the inclusion of news arrival as proxied by the contemporaneous volume of demand, time-of-day, day-of-week and month-of-year effects as exogenous explanatory variables. The skewed Student APARCH model, which takes account of right skewed and fat tailed characteristics, produces the best results in all four markets. The results indicate significant innovation (ARCH effects) and volatility (GARCH effects) spillovers in the conditional standard deviation equation, even with market and calendar effects included. Intraday prices also exhibit significant asymmetric responses of volatility to the flow of information.



Soft Fiscal Policies for a Polluting Monopolist

Manel Antelo and Maria L. Loureiro

Year: 2009
Volume: Volume 30
Number: Special Issue #2
DOI: 10.5547/ISSN0195-6574-EJ-Vol30-NoSI2-8
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Abstract:
This paper examines optimal environmental taxation in an incomplete-information two-period model in which a monopolistic firm produces and pollutes. The firm is privately informed about its costs of production and abatement, and the regulator � which can only infer the firm�s technology after observing the output from the period 1 � has the chance to set environmental taxes in period 1 to correct the firm�s opportunistic behavior. The regulator is aware that the polluter may strategically choose a given level of production (and pollution) in period 1 in order to manipulate the regulator�s beliefs concerning its technology and, consequently, adjusts the tax paid in period 2. We show that if the regulator reduces pollution taxes in the first period below the level under symmetric information, then the clean firm will signal its type by further reducing its output. Having gathered information from the firm with respect to its technology and emissions, the regulator raises pollution taxes in the second period. In the light of the present results, soft fiscal policies based on initial low-taxes, which are later increased, may be used in the presence of asymmetric information to provide incentives for a firm to reveal its true level of emissions and mitigate opportunistic behavior.



Split Incentives in Residential Energy Consumption

Kenneth Gillingham, Matthew Harding, and David Rapson

Year: 2012
Volume: Volume 33
Number: Number 2
DOI: 10.5547/01956574.33.2.3
View Abstract

Abstract:
We explore two split incentive issues between owners and occupants of residential dwellings: heating or cooling incentives are suboptimal when the occupant does not pay for energy use, and insulation incentives are suboptimal when the occupant cannot perfectly observe the owner's insulation choice. We empirically quantify the effect of these two market failures and how they affect behavior in California. We find that those who pay are 16 percent more likely to change the heating setting at night and owner-occupied dwellings are 20 percent more likely to be insulated in the attic or ceiling. However, in contrast to common conception, we find that only small overall energy savings may be possible from policy interventions aimed at correcting the split incentive issues. Keywords: Principal-agent, Asymmetric information, CO2 emissions



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.



The Effect of Information on TOU Electricity Use: an Irish residential study

Shirley Pon

Year: 2017
Volume: Volume 38
Number: Number 6
DOI: 10.5547/01956574.38.6.spon
View Abstract

Abstract:
The disconnect between the time of use and the time of payment is sometimes blamed for the little awareness that many consumers appear to have about their usage of electricity. Real time information feedback combined with various pricing schemes has been found to reduce residential energy consumption more than information and pricing policies alone. I examine the effect of information provision with bi-monthly billing, monthly billing, and in-home displays in addition to a time-of-use pricing scheme on consumption over each month of the Irish Consumer Behavior Trial. I find that time-of-use pricing with real time usage information reduces electricity usage up to 8.7 percent during peak times at the start of the trial but the effect becomes indistinguishable from other treatment groups after the first three months. Increasing billing reports to the monthly level or a web application providing real time information may be more cost effective than in-home displays.



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
View Abstract

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.



Shock Propagation Across the Futures Term Structure: Evidence from Crude Oil Prices

Delphine H. Lautier, Franck Raynaud, and Michel A. Robe

Year: 2019
Volume: Volume 40
Number: Number 3
DOI: 10.5547/01956574.40.3.dlau
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Abstract:
To what extent are futures prices interconnected across the maturity curve? Where in the term structure do price shocks originate, and which maturities do they reach? We propose a new approach, based on information theory, to study these cross-maturity linkages and the extent to which connectedness is impacted by market events. We introduce the concepts of backward and forward information flows, and propose a novel type of directed graph, to investigate the propagation of price shocks across the WTI term structure. Using daily data, we show that the mutual information shared by contracts with different maturities increases substantially starting in 2004, falls back sharply in 2011-2014, and recovers thereafter. Our findings point to a puzzling re-segmentation by maturity of the WTI market in 2012-2014. We document that, on average, short-dated futures emit more information than do backdated contracts. Importantly, however, we also show that significant amounts of information flow backwards along the maturity curve - almost always from intermediate maturities, but at times even from far-dated contracts. These backward flows are especially strong and far-reaching amid the 2007-2008 oil price boom/bust.




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