Fundamental and Behavioural Drivers of Electricity Price Volatility
AbstractThe stochastic properties of volatility in spot electricity prices are only partially understood and present substantial modelling challenges. This paper develops and applies three complementary modelling approaches in order to uncover its fundamental and behavioural drivers over time and across intra-day trading periods. First, intra-day prices are related to systematic components, including economic fundamentals, strategic and market design effects. Then, residual volatility is attributed to: i) regular, non-linear agent reactions to market fundamentals (covariates of heteroscedasticity), ii) the adaptation of price formation due to substantial agent learning (time-varying effects), and iii) the transient extreme pricing in periods of scarcity (regime-switching dynamics). We find that, i) GARCH effects diminish, when each of the above sources of volatility is accounted for, and ii) allowing for the time-varying responses of prices to fundamentals can yield more precise volatility estimates than an explicit GARCH specification.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by De Gruyter in its journal Studies in Nonlinear Dynamics & Econometrics.
Volume (Year): 14 (2010)
Issue (Month): 4 (September)
Contact details of provider:
Web page: http://www.degruyter.com
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- O'Mahoney, Amy & Denny, Eleanor, 2013.
"Electricity prices and generator behaviour in gross pool electricity markets,"
Elsevier, vol. 63(C), pages 628-637.
- O'Mahoney, Amy & Denny, Eleanor, 2011. "Electricity Prices and Generator Behaviour in Gross Pool Electricity Markets," MPRA Paper 34847, University Library of Munich, Germany.
- Joanna Janczura & Rafał Weron, 2012.
"Efficient estimation of Markov regime-switching models: An application to electricity spot prices,"
AStA Advances in Statistical Analysis,
Springer, vol. 96(3), pages 385-407, July.
- Joanna Janczura & Rafal Weron, 2011. "Efficient estimation of Markov regime-switching models: An application to electricity spot prices," HSC Research Reports HSC/11/02, Hugo Steinhaus Center, Wroclaw University of Technology.
- Janczura, Joanna & Weron, Rafal, 2011.
"Goodness-of-fit testing for the marginal distribution of regime-switching models,"
32532, University Library of Munich, Germany.
- Janczura, Joanna & Weron, Rafal, 2010. "Goodness-of-fit testing for regime-switching models," MPRA Paper 22871, University Library of Munich, Germany.
- Haugom, Erik & Ullrich, Carl J., 2012. "Forecasting spot price volatility using the short-term forward curve," Energy Economics, Elsevier, vol. 34(6), pages 1826-1833.
- Joanna Janczura & Rafał Weron, 2013. "Goodness-of-fit testing for the marginal distribution of regime-switching models with an application to electricity spot prices," AStA Advances in Statistical Analysis, Springer, vol. 97(3), pages 239-270, July.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.