The Forward Premium in the Nord Pool Power Market

Haugom, Erik; Hoff, Guttorm Andre; Molnar, Peter; Mortensen, Maria; Westgaard, Sjur

Haugom, Erik; Hoff, Guttorm Andre; Molnar, Peter; Mortensen, Maria; Westgaard, Sjur

Journal article, Peer reviewed

Accepted version

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URI

http://hdl.handle.net/11250/2622737

Date

2018-03

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Original version

Haugom, E. et al. (2018) The Forward Premium in the Nord Pool Power Market. Emerging markets finance & trade. 54(8), pp. 1793-1807. 10.1080/1540496X.2018.1441021

Abstract

This article investigates the forward premium of futures contracts in the Nordic power market for the time period from January 2004 to December 2013. We find that futures prices are biased predictors of the subsequent spot prices and that there is a significant forward premium in the Nord Pool market, particularly during the winter and autumn. We analyze the impact from several factors on the forward premium. The spot price, and the deviation of water inflow from its usual level, positively affect the forward premium. The variance of the spot price also has a positive effect on the forward premium, but only for the contract closest to delivery.

Description

This is an Accepted Manuscript of an article published by Taylor & Francis in Emerging Markets Finance and Trade on 14 March 2018, available online: http://www.tandfonline.com/10.1080/1540496X.2018.1441021.