Market efficiency and risk premia in short-term forward prices

Erik Haugom and Carl J. Ullrich

Energy Economics, 2012, vol. 34, issue 6, 1931-1941

Abstract: Using recursive estimation and rolling windows over extended sample periods we examine the time-varying relationship between spot and short-term forward prices in the Pennsylvania–New Jersey–Maryland (PJM) wholesale electricity market. We examine theoretical models of forward risk premia in electricity markets and show that recent data do not provide support for existing models. The results indicate that short-term forward prices have converged towards unbiased predictors of the subsequent spot prices.

Keywords: Market efficiency; Unbiased forward rate hypothesis; Joint hypothesis problem; Forward prices; Electricity markets (search for similar items in EconPapers)
JEL-codes: G13 G14 L94 Q47 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:34:y:2012:i:6:p:1931-1941

DOI: 10.1016/j.eneco.2012.08.003

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