The Efficient Market Hypothesis at Nord Pool:A study of the forwards market

Abstract: In recent times the increasing economic importance of electricity raised new interest in the study of its market. In particular the existence of an efficient derivative market where players can mitigate their risk exposure has been considered fundamental. In this work an analysis on the weak form of efficiency for the forwards market at Nord Pool is carried through taking the three most traded contracts as indicators. Different statistical tests and a scenario analysis on extreme conditions on the supply side are employed in order to gain a greater understanding of the state of the market. Evidences of inefficiency are found for the monthly and quarterly contracts, while the market shows higher levels of efficiency in a situation with abundant hydro power resources.