Can the market forecast the weather better than meteorologists?

Arbeitspapier

Many companies depend on weather conditions, so they require reliable weather forecasts for production planning or risk hedging. In this article, we propose a new way of gaining weather forecasts by exploiting the forward-looking information included in the market prices of weather derivatives traded at the Chicago Mercantile Exchange (CME). For this purpose, the CME futures prices of two monthly temperature indices relevant for the energy sector are compared with index forecasts derived from meteorological temperature forecasts. It turns out that the market prices generally outperform the meteorological forecasts in predicting the outcome of the monthly index. Hence, companies whose profit strongly depends on these indices, such as energy companies, can profit from this additional information source about future weather.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: SFB 649 Discussion Paper ; No. 2012-067

Klassifikation und Themen

• Klassifikation: Wirtschaft ; International Financial Markets ; Financial Forecasting and Simulation ; Energy: Demand and Supply; Prices ; Energy Forecasting
• Thema: Weather derivatives ; weather forecasts ; CME ; energy sector

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Ritter, Matthias
• Ereignis: Veröffentlichung
• (wer): Humboldt University of Berlin, Collaborative Research Center 649 - Economic Risk
• (wo): Berlin
• (wann): 2012

Weitere Informationen

• Handle: http://hdl.handle.net/10419/79581
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ