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Convenience Yields in Electricity Prices: Evidence from the Natural Gas Market

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  • Nikolaos Milonas
  • Nikolaos Paratsiokas

Abstract

This study develops a model in which changes in the electricity basis are directly related to changes in the fuel's storage level and the fuel's convenience yield. The model is tested with data from the US electricity and natural gas markets during the period 2004–2014. Empirical results show a negative relationship between the electricity basis and the fuel's convenience yield giving support to the argument that non‐storable commodities embody convenience yields. © 2016 Wiley Periodicals, Inc. Jrl Fut Mark 37:522–538, 2017

Suggested Citation

  • Nikolaos Milonas & Nikolaos Paratsiokas, 2017. "Convenience Yields in Electricity Prices: Evidence from the Natural Gas Market," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 37(5), pages 522-538, May.
    • Handle: RePEc:wly:jfutmk:v:37:y:2017:i:5:p:522-538
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    Cited by:

    1. Akihiro Omura & Neda Todorova, 2019. "The quantile dependence of commodity futures markets on news sentiment," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 39(7), pages 818-837, July.
    2. Nikolaos T. Milonas & Evangelia K. Photina, 2024. "The convenience yield under commodity financialization," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 44(4), pages 631-652, April.
    3. Xiong, Heng & Mamon, Rogemar, 2019. "A higher-order Markov chain-modulated model for electricity spot-price dynamics," Applied Energy, Elsevier, vol. 233, pages 495-515.

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