Abstract
Forward markets are believed to aggregate information about future spot prices and reduce the cost of producing the commodity. We develop a measure of the extent to which forward and spot prices agree in markets with transaction costs. Using this measure, we show that day-ahead prices better reflect real-time prices at all locations in California’s electricity market after the introduction of financial trading. We then present evidence suggesting that operating costs and input fuel use fell after the introduction of financial trading on days when the nonconvexities inherent to the production and transmission of electricity are especially relevant. (JEL D23, D24, G13, L94, L98, Q48)
Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
