Order book data
Challenging illusions of explanatory depth
It’s all too tempting to think about the state of energy spot markets in terms of volume weighted average prices. And yes, average prices are useful as a summary statistic.
Beneath the VWAP-surface there’s a fascinating world of buyers and sellers and how they come together. How much do you think you know, and how much do you really know about the world beneath the VWAP?
Remember all that marketing around virtual cycling? Isn’t that a fine example of the illusion of explanatory depth? You simply cannot hold on to this concept if you understand how the market operates. Please tell me if you think I’m wrong and suffering from the illusion myself!
Our aim is to remind ourselves of the complexity and beauty of market microstructure in a small and natural step forward within our unfolding energy market exploration.
Earlier this year we used various of the available EPEX Spot summary statistics to speculate about the role of liquidity in price formation and noted that…
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