Posted on 12/04/2019 10:19:41 AM PST by karpov
Markets are superb at turning what participants believe to be facts into prices. An intriguing new National Bureau of Economic Research study on market expectations about climate change looks at the price trends of Chicago Mercantile Exchange (CME) weather futures contracts.
"The evidence shows that financial markets fully incorporate climate model projections," conclude Columbia University's agricultural and resource economist Wolfram Schlenker and sustainable development researcher Charles Taylor. "We find that the market has been accurately pricing in climate change, largely in line with global climate models, and that this began occurring at least since the early 2000s when the weather futures markets were formed."
In 2001, the CME created a weather futures market enabling traders to hedge against losses stemming from fluctuations in the weather. As the researchers explain, the predominant contracts are based on heating and cooling degree days, which are indexed to 65 degrees Fahrenheit and encompass eight cities scattered across the United States. Cooling degree days (CDD) measure by how much and for how long temperatures exceed 65 degrees and thus require cooling. Conversely, heating degree days (HDD) measure by how much and for how long temperature fall below 65 degrees and thus require heating. The CDDs are traded for the months of May, June, July, August, and September, and the HDDs are traded for the months of November, December, January, February, and March. The payoff of these contracts is based on the cumulative difference between the daily temperature and 65 degrees Fahrenheit during a certain period of time, usually one month.
The notional value of weather futures and options traded on the CME in the last year adds up to more than $360 million, according to the Wall Street Journal. Over the counter trading values are much larger.
(Excerpt) Read more at reason.com ...
Someone pushed him to the left
Didn’t Chicago have the Carbon Credit disaster
Sheesh...the “Market” like politics is being driven by the leftist”s media.
Of course ‘the markets’ say that global warming is happening. They stand to make money off it.
Buy the rumor, sell the fact.
Driving prices up. Leftists seem to have only one goal in mind: break the economy, then pretend to fix it through government takeover.
Reason?
Antithesis thereof
This looks like data mining to me. Start with a conclusion, then go looking for “facts” to support that conclusion.
What annoys me a lot is all these talk and use of the term CLIMATE CHANGE as if any sane person believes that climate doed not change.
The issue is and has always been -— GIVEN THE FACT THAT CLIMATE DOES CHANGE, to what extent are man’s activities causing it, if at all?
I propose we all use this abbreviation instead MMCC or ACC.
MMCC: MAN-MADE CLIMATE CHANGE
ACC: ANTHROPOGENIC CLIMATE CHANGE
He might not have moved to the left. With idiots in the private sector (consumers, corporate executives and bankers) having bought the climate cult drivel, it is not surprising that market pricing reflects hysterical climate phobia.
If Professor Valentina Zharkova's predictions are correct, there will be a lot more of these in the coming two decades.
Re
“....Markets are superb at turning what participants believe to be facts into prices. An intriguing new National Bureau of Economic Research study on market expectations about climate change looks at the price trends of Chicago Mercantile Exchange (CME) weather futures contracts....”
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One way or tother and anyway but looose....we are all conditioned by everything!
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GunnyG@PlanetWTF?/WNW!
SemperTRUMP.45!
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This is stupid. The markets just started less than 20 years ago. They did not have it right. It takes time for markets to hone in on right. It is also crazy to think that markets can make use of a .3% global change in temperature. So this is not a story of reliance. Its a story of “overfit”. Which is the statistical term that says, you give me any bucket of data and I can find a story in it. Like flipping a coin 1000 times you can always find the one time where heads showed up 6 times in a row, or the reverse.
Scientific theory states that you have to create a theory first then test it several times to see if it can be verified. But looking at data first and then gleaning observations means that you are creating a theory based on chance occurrences, not science.
The “market” thought WeWorj was a runaway success.
I’ve already pointed out this fascist move elsewhere initiated by Obama.
Regulators are mandating that banks account for climate change as part of due diligence - this trickle down to insurance companies who are now charging for “climate change” or refusing to insure companies (like coal, car manufacturers) that “cause” climate change.
This means businesses must account for it in their bottom line or, effectively, the government is starving them out. Just as social media and PayPal, and credit card companies are doing it to the internet.
Climate is always changing. Man-made climate change is the big lie.
It’s part of a pattern I’ve seen from “Reason”
Actually, this is looks like a perfect vehicle for making money off of biased public perceptions. Massive discontinuities from reality can be monetized. National elections are a perfect example, where the media routinely attempts to ensure the leftist candidates win, constructs polling to reinforce this agenda, and disproportionately reports negatively on the opposition to the leftist candidate. See the 2016 election, and I think it was the 2018 election in Australia, where people made a lot of money betting on the more conservative candidate, was at much longer odds due to public misperception of reality.
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