by Ying Chiat Ho

Abstract 

This paper provides a case study on the informational role of futures prices by investigating the ability of Cooling Degree Day (CDD) futures prices to forecast electricity consumption for New York State. I develop a cross-sectional model relating electricity consumption with the cumulative CDDs in a month for New York City and utilize the 30-day ahead settlement prices of the New York CDD futures contracts within the model to forecast electricity consumption. The forecasts derived explain up to 94.68% of the variation in actual electricity consumption, suggesting that the CDD futures prices contain useful forward-looking information about electricity consumption.

Professor Edward Tower, Faculty Advisor

JEL Codes: G13,

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