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The hedging effectiveness of electricity futures in the Spanish market

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dc.affiliation.dptoUC3M. Departamento de Economía de la Empresaes
dc.contributor.authorPeña, Juan Ignacio
dc.contributor.funderComunidad de Madrides
dc.contributor.funderMinisterio de Ciencia e Innovación (España)es
dc.date.accessioned2023-09-28T10:07:14Z
dc.date.available2023-09-28T10:07:14Z
dc.date.issued2023-05
dc.description.abstractThis paper studies the year-by-year and month-by-month (the same month in all years) hedging effectiveness of futures contracts in the Spanish electricity market from 2007 to 2022. We compare the in-sample and out-of-sample hedging ability of naïve, minimum variance, partially predictable, non-parametric, and BEKK_T hedge ratios. Hedging effectiveness varies over time and across months because of unstable correlations between spot price changes and futures price changes. Some methods present meaningful in-sample performance, but the out-of-sample hedging effectiveness is limited. The hedging effectiveness of the naïve ratio on a year-by-year (month-by-month) basis, with monthly differences, is 16% (40%).en
dc.description.sponsorshipTwo anonymous referees provided comments that improved the paper. We acknowledge financial support from Ministerio de Ciencia e Innovación grant PID2020-115744RB-I00, from CAM through grant EARLYFIN-CM, #S2015/HUM-3353, and from the Madrid Government (Comunidad de Madrid-Spain) under the Multiannual Agreement with UC3M in the line of Excellence of University Professors (EPUC3M12).en
dc.format.extent7
dc.identifier.bibliographicCitationPeña, J. I. (2023). The hedging effectiveness of electricity futures in the Spanish market. Finance Research Letters, 53, 103507.en
dc.identifier.doihttps://doi.org/10.1016/j.frl.2022.103507
dc.identifier.issn1544-6123
dc.identifier.publicationfirstpage1
dc.identifier.publicationissue103507
dc.identifier.publicationlastpage7
dc.identifier.publicationtitleFinance Research Lettersen
dc.identifier.publicationvolume53
dc.identifier.urihttps://hdl.handle.net/10016/38465
dc.identifier.uxxiAR/0000033394
dc.language.isoengen
dc.publisherElsevieren
dc.relation.projectIDComunidad de Madrid. S2015/HUM-3353es
dc.relation.projectIDGobierno de España. PID2020-115744RB-I00es
dc.relation.projectIDComunidad de Madrid. EPUC3M12es
dc.relation.projectIDAT-2022
dc.rights© 2022 The Author(s).en
dc.rightsAtribución 3.0 España*
dc.rights.accessRightsopen accessen
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/es/*
dc.subject.ecienciaEconomíaes
dc.subject.ecienciaEmpresaes
dc.subject.otherElectricity marketsen
dc.subject.otherOptimal hedge ratioen
dc.subject.otherFutures contractsen
dc.subject.otherHedge effectivenessen
dc.titleThe hedging effectiveness of electricity futures in the Spanish marketen
dc.typeresearch article*
dc.type.hasVersionVoR*
dspace.entity.typePublication
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