Market efficiency and lead-lag relationships between spot, futures and forward pricesthe case of the Iberian Electricity Market (MIBEL)

Resumen

This paper analyzes the relationships between prices from three different markets within the Spanish zone of the Iberian Electricity Market (MIBEL), namely futures, spot and OTC forward markets. The analysis focuses on three aspects: (i) contrasting the weak efficient hypothesis, (ii) analyzing the simple efficiency of the futures market and the short-term causality between the proxy of the spot and futures prices, and (iii) examining the price discovery relationships between the involved series of prices. The empirical results confirm that MIBEL (both spot and futures) prices satisfy the weak efficient hypothesis. As well, the MIBEL futures market is efficient in the simple sense and there is unidirectional short-term causality from the futures price to the proxy of the spot price. Lastly, price discovery relationships are also found. In particular, there is unidirectional causality from the futures market to the forward market and to the spot market for 1-month- and 1-quarter-ahead maturities.