Price discovery function of electricity futures market

Price discovery is one of the basic functions of futures market,which reflects the efficiency of futures market.With Nordic electricity futures market as an example,the simple efficiency is discussed with cointegration theory and error correction model to test its price discovery function.The lead -lag relationship between Nordic electricity futures market and spot market is studied with the Granger causality test,impulse response analysis and variance decomposition method.The results show that,there is cointegration relationship between the futures price and the spot price,the former is an unbiased estimator of the latter,and Nordic electricity futures market satisfies the simple efficiency;the futures price change is leading the spot price change,Nordic futures market plays the leading role in price discovery,and Nordic electricity futures market has good price discovery function.