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This paper contributes to the empirical literature on the forward premium anomaly by investigating possible statistical explanations for this puzzling phenomenon in the energy market. To this end, time series of spot and different forward maturities for West Texas Intermediate (WTI) crude oil and Reformulated Gasoline Blendstock for Oxygen Blending (RBOB) traded on the New York Mercantile Exchange (NYMEX) over the period 1986–2018 are used. The statistical properties of the spot and forward premium time series are examined by using unit root tests with structural breaks and a long memory process. The time-varying slope coefficient of regressing spot returns on the lagged forward premium is then estimated via the rolling sample technique and the state space model using the Kalman filter. The empirical results provide strong support for the presence of multiple structural breaks and long memory in the forward premium of the crude oil and RBOB energy time series in contrast to the spot returns series, which are stationary. The results also show evidence for time-varying beta coefficients for all the energy maturities considered. Overall, there is strong evidence for the forward premium anomaly with a larger negative slope parameter for the crude oil compared to the regular RBOB gasoline. The rejection of the forward rate unbiasedness hypothesis suggests that the futures price cannot play a significant role in price discovery.

Nord Pool is the leading power market in Europe. It has been documented that the forward contracts traded in this market exhibit a significant forward premium, which could be a sign of market inefficiency. Efficient power markets are important, especially when there is a goal to increase the share of the power mix stemming from renewable energy sources. We therefore contribute to the understanding of this topic by examining how the forward premium in the Nord Pool market depend on several economic and physical conditions. We utilise two methods: ordinary least squares and quantile regression. The results show that the reservoir level and the basis (the difference between the forward and spot price) have a significant impact on the forward premium. The realised volatility of futures prices and the implied volatility of the stock market have strong effects on both the conditional lower and upper tails of the forward premium. We also find that, as the market has matured, the forward premium has decreased, indicating an increase in market efficiency. This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited

Theoretically, exchange rate fluctuations should be positively related to interest-rate differential. This paper empirically examines whether such a relationship holds between EUR/RSD exchange rate and the corresponding interbank interest rates. Estimates on daily data between 2008 and 2015 obtained from a linear regression model indicate that this relationship is in fact negative, consistent with the forward premium anomaly. The result persists over different time horizons. The exchange-rate predictability builds over time. The uncovered interest-rate parity does not hold.

This paper provides a comprehensive evaluation of the short-horizon predictive ability of economic fundamentals and forward premiums on monthly exchange-rate returns in a framework that allows for volatility timing. We implement Bayesian methods for estimation and ranking of a set of empirical exchange rate models, and construct combined forecasts based on Bayesian model averaging. More importantly, we assess the economic value of the in-sample and out-of-sample forecasting power of the empirical models, and find two key results: (1) a risk-averse investor will pay a high performance fee to switch from a dynamic portfolio strategy based on the random walk model to one that conditions on the forward premium with stochastic volatility innovations and (2) strategies based on combined forecasts yield large economic gains over the random walk benchmark. These two results are robust to reasonably high transaction costs. The Author 2008. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.

We propose a model where wholesale electricity prices are explained by two state variables: demand and capacity. We derive analytical expressions to price forward contracts and to calculate the forward premium. We apply our model to the PJM, England and Wales, and Nord Pool markets. Our empirical findings indicate that volatility of demand is seasonal and that the market price of demand risk is also seasonal and positive, both of which exert an upward (seasonal) pressure on the price of forward contracts. We assume that both volatility of capacity and the market price of capacity risk are constant and find that, depending on the market and period under study, it could either exert an upward or downward pressure on forward prices. In all markets we find that the forward premium exhibits a seasonal pattern. During the months of high volatility of demand, forward contracts trade at a premium. During months of low volatility of demand, forwards can either trade at a relatively small premium or, even in some cases, at a discount, i.e. they exhibit a negative forward premium Publicado