Forward premia in electricity markets: A replication study

Silvester Van Koten

Energy Economics, 2020, vol. 89, issue C

Abstract: Motivated by mixed empirical evidence for the risk premium theory of Bessembinder and Lemmon (2002), I perform a replication study by rerunning simulations. The risk premium theory links forward premia to the statistical properties of the anticipated distribution of spot power prices in an equilibrium approach. My simulations, closely following those run in the original paper, support the first three hypotheses, but not hypothesis 4. An increase in mean demand can thus result in a lower forward premium for some ranges of parameter values. The replication results do not explain the mixed empirical support for the theory.

Keywords: Forward premia; Electricity markets; Energy economics; Financial markets (search for similar items in EconPapers)
JEL-codes: C8 G13 G17 L94 Q41 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:89:y:2020:i:c:s0140988320301523

DOI: 10.1016/j.eneco.2020.104812

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