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Can the Basis Lead to Arbitrage Profits on the MISO Exchange?

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  • Kevin Jones

    (University of Houston-Downtown, USA.)

Abstract

Previous research has shown the basis contains information about future spot prices in wholesale electricity markets. This paper examines the profitability of a trading rule that utilizes the basis on the Midcontinent Independent System Operator (MISO) exchange. 24 hourly time series regressions across each of MISO s eight regional hubs are estimated to determine the rule s effectiveness. 67 of the 192 total regressions yield statistically significant results. The number of significant results as well as the size of the returns tend to be highest during the afternoon through early evening hours, which calls into question the efficiency of the market during peak demand times.

Suggested Citation

  • Kevin Jones, 2023. "Can the Basis Lead to Arbitrage Profits on the MISO Exchange?," International Journal of Energy Economics and Policy, Econjournals, vol. 13(3), pages 1-6, May.
    • Handle: RePEc:eco:journ2:2023-03-1
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Electricity derivatives; Market efficiency; Midwest Independent System Operator;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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