Estimating functional efficiency in energy futures markets

Authors

  • Javier Garcia-Verdugo Full Professor of Applied Economics, UNED (Madrid).
  • Meliyara Sirex Consuegra Research Assistant, Department of Applied Economics, UNED (Madrid).

DOI:

https://doi.org/10.17811/ebl.2.3.2013.105-115

Abstract

This paper proposes a method to estimate the functional efficiency of energy futures markets in terms of social welfare. Using a standard futures markets structural model, it can be concluded that the error committed when using futures prices at moment t to predict spot prices at t+1 results in welfare losses through resource misallocation. Therefore, the social welfare associated with the presence of energy futures markets can be measured using a social loss (SL) statistic and its components. This statistic is computed for six energy futures contracts with eight maturities each with data from April 1992 to December 2012. The results confirm the consistency and robustness of the method. Finally, several practical uses for the SL statistic are suggested.

Author Biographies

Javier Garcia-Verdugo, Full Professor of Applied Economics, UNED (Madrid).

Full Professor, Department of Applied Economics (UNED), where he is teaching a PhD. course on Energy Economics and Policy. Ph.D. in Economics at UNED, with a dissertation about the welfare effects of energy futures markets that received a Special Award. Visiting Fellow at the Center of International Studies and at the Southern European Research Group (Princeton University). Member of the Research Group on International Political Economy and Energy (UNED). He is the author of several books and a good number of papers published in Spanish and international journals about energy economics, international finance, economic development and global public goods... He is presently acting as expert witness in an international arbitrage between a group of photovoltaic investors and the Kingdom of Spain.

Meliyara Sirex Consuegra, Research Assistant, Department of Applied Economics, UNED (Madrid).

Research Assistant and Scholarship holder, Department of Applied Economics (UNED). Graduated in Economics at Universidad Nacional de Colombia. Master in International and Development Economics at Universidad Complutense de Madrid (UCM). Ph.D. student on “The variability of food prices in developing countries and its effects: public and private solutions to food security”. Member of the Research Group on International Political Economy and Energy in UNED.

Downloads

Published

29-10-2013

How to Cite

Garcia-Verdugo, J., & Consuegra, M. S. (2013). Estimating functional efficiency in energy futures markets. Economics and Business Letters, 2(3), 105–115. https://doi.org/10.17811/ebl.2.3.2013.105-115

Issue

Vol. 2 No. 3 (2013): September - Special Issue: Selected papers from 11th International Economic Policy Conference

Section

Special Section

License

The works published in this journal are subject to the following terms:

1. Oviedo University Press (the publisher) retains the property rights (copyright) of published works, and encourages and enables the reuse of the same under the license specified in paragraph 2.

© Ediuno. Ediciones de la Universidad de Oviedo / Oviedo University Press

2. The works are published in the online edition of the journal under a Creative Commons Attribution-Non Commercial-Non Derives 3.0 Spain (legal text). You can copy, use, distribute, transmit and publicly display, provided that: i) you cite the author and the original source of publication (journal, publisher and URL of the work), ii) they are not used for commercial purposes, iii) mentions the existence and specifications of this license.

3. Conditions of self-archiving. The author can archive the post-print version of the article (publisher’s version) on the author’s personal website and/or on the web of  the institution where he belong, including a link to the page of the journal and putting the way of citation of the work. Economics and Business Letters and its URL https://reunido.uniovi.es/index.php/EBL/index are the only authorized source for correctly giving the reference of the publisher’s version in every mention of the article.