EFFICIENCY AND CROSS–MARKET INTERACTIONS BETWEEN ELECTRICITY MARKETS: AN ANALYSIS OF FORWARD PRICE AND VOLATILITY LEVELS

The aims are several. Are the forward prices similar to the spot prices? Do they exhibit the same dynamics of the former or do they change when time to maturity increases? Moreover do they respect the contango or backwarda-tion phenomena described and documented in other financial markets (futures markets)? Theory states that we should observe forward prices approaching spot prices when maturity becomes longer and longer, do this happens to Eu-ropean Electricity Forward prices? that is Are these markets efficient? If not (and this is the case), are forward prices good or bad predictor of spot prices? to this aim we have used the forecast power definition of Fama and French. Do we observe ”the same ” forward prices on all considered markets? Does the situation change with different maturities? Are there any relationships between European forward prices? are they influencing each other because of the interconnection lines? If forward prices are significantly different from one market to the other, it is possible to do an arbitrage, under the condition o