Predictive Performance and Bias - Evidence from Natural Gas Markets

Posted: 16 Sep 2011 Last revised: 23 Sep 2014

See all articles by Thomas Reinhard Kremser

Thomas Reinhard Kremser

Vienna University of Economics and Business - Institute for Finance, Banking and Insurance

Margarethe Rammerstorfer

Vienna University of Economics and Business - Department of Corporate Finance

Date Written: December 28, 2011

Abstract

This paper sheds light on the differences and similarities in natural gas trading at the National Balancing Point in the UK and the Henry Hub located in the US. For this, we analyze traders' expectations and implement a mechanical forecasting model that allows traders to predict future spot prices. Based on this, we compute the deviations between expected and realized spot prices and analyze possible reasons and dependencies with other market variables. Overall, the mechanical predictor performs well, but a small forecast error remains which can not be characterized by the explanatory variables included.

Keywords: Natural Gas, Commodity Pricing, Unbiasedness, Kalman Filter, Risk Premia

JEL Classification: C1, C5, G1, Q4

Suggested Citation

Kremser, Thomas Reinhard and Rammerstorfer, Margarethe, Predictive Performance and Bias - Evidence from Natural Gas Markets (December 28, 2011). Midwest Finance Association 2012 Annual Meetings Paper, Available at SSRN: https://ssrn.com/abstract=1928554 or http://dx.doi.org/10.2139/ssrn.1928554

Thomas Reinhard Kremser (Contact Author)

Vienna University of Economics and Business - Institute for Finance, Banking and Insurance ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

Margarethe Rammerstorfer

Vienna University of Economics and Business - Department of Corporate Finance ( email )

Welthandelsplatz 1
1020 Vienna
Austria

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