Association Webinars: International Comparison of the Efficiency of Electricity Futures



The project makes an original contribution to the electricity market literature by using an international sample to explore the efficiency of electricity futures across different markets. We focus on the efficiency of five futures markets (Australia, Germany, New Zealand, Nord Pool and the PJM Interconnection) between 2002 and 2016. Our analysis has three components; first we explore the validity of the unbiasedness hypothesis in this context; second, we test the forecast power of futures prices; and; third we explore market characteristics as determinants of efficiency. Our analysis of the unbiasedness hypothesis finds that the German and New Zealand markets are the only efficient markets for the entire sample, even though they are at the two extremes in terms of liquidity and market maturity. When testing the forecast power, all futures markets outperform naive forecasts and the predictability seems to be improving as markets mature, except for the U.S. futures which show a decline. The generating mix does not seem to affect forecast ability. We find that market efficiency is time varying, mostly improving with market maturity and is related to risk and liquidity factors.

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Dr Sebastian Gehricke, Deputy Director of the Climate and Energy Finance Group (CEFGroup), Dept. of Accountancy and Finance, University of Otago Business School
Dr Gehricke has been researching in the area of Climate Finance and Sustainable Investments for two years now, after completing a Phd employing theoretical and emperical asset pricing techniques in the volatility derivatives markets. His interests a dominantly in sustainable investment's risk and performance, carbon markets and the effects of climate risks.

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Event Date: October 26, 2020

Event Time: 4:00 - 5:00 PM Eastern Time

Topic: International Comparison of the Efficiency of Electricity Futures

Price: FREE

Speaker: Sebastian Gehricke

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