Samuelson hypothesis and electricity derivative markets

Résumé En

It is common to assert, in the literature on commodity derivative markets, that the behavior of futures prices is characterized by the "Samuelson Hypothesis": there is a decreasing pattern of volatilities along the prices curve. Despite some debates about statistical measurements, this hypothesis has found a large empirical support. Yet, to the best of our knowledge, one of its empirical implications has never been proposed nor tested: if Samuelson is right, then prices shocks emerging in the physical market should propagate in the direction of the paper market. The first contribution of this paper is to fill this gap. Second contribution: up to now, the validation of the Samuelson hypothesis has never been considered in the case of electricity futures markets. Yet the non storability of this commodity raises interesting questions. Is the Samuelson hypothesis still valid in such a context? What does this commodity learn us about the role of inventories in the prices’ volatilities? In order to answer these questions, we examine the prices behavior of the four most important electricity futures markets, worldwide, from 2009 to 2013: the German market, the NordPool, the Australian market and the PJM Western Hub in the USA. We use the American crude oil market as a benchmark for a storable commodity negotiated on a futures market and as an example of a mature market. We find evidence, for all markets, of a maturity impact. Finally, we rely on the recent notion of indirect storability as a first direction to explain such conclusion.