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Integration and shock transmissions across European electricity forward markets

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  • Bunn, Derek W.
  • Gianfreda, Angelica

Abstract

New results are presented relating to the integration of the French, German, British, Dutch and Spanish power markets at day-ahead, week-ahead, one month-ahead and two month-ahead lead times. Overall, there is evidence of market integration, increasing over time, despite an underlying inefficiency in each market with respect to the forward and spot price convergence. The spatial analysis, on a financial dimension, is undertaken using causality tests, cointegration and impulse-response techniques, for both price levels and volatilities. In general we find less influence of the size and proximity of neighbouring markets than other studies, more integration at baseload than peak, and, surprisingly, less integration in forwards than spot prices.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 32 (2010)
Issue (Month): 2 (March)
Pages: 278-291

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Handle: RePEc:eee:eneeco:v:32:y:2010:i:2:p:278-291

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Web page: http://www.elsevier.com/locate/eneco

Related research

Keywords: Electricity Forward prices Efficiency Integration Volatility Shock transmissions;

References

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  1. Huisman, R. & Huurman, C. & Mahieu, R.J., 2007. "Hourly electricity prices in day-ahead markets," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3131737, Tilburg University.
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  4. De Vany, Arthur S. & Walls, W. David, 1999. "Cointegration analysis of spot electricity prices: insights on transmission efficiency in the western US," Energy Economics, Elsevier, vol. 21(5), pages 435-448, October.
  5. Karolyi, G Andrew, 1995. "A Multivariate GARCH Model of International Transmissions of Stock Returns and Volatility: The Case of the United States and Canada," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 11-25, January.
  6. Andrew C. Worthington & Adam Kay-Spratley & Helen Higgs, 2002. "Transmission of prices and price volatility in Australian electricity spot markets: A multivariate GARCH analysis," School of Economics and Finance Discussion Papers and Working Papers Series 114, School of Economics and Finance, Queensland University of Technology.
  7. Francis A. Longstaff & Ashley W. Wang, 2004. "Electricity Forward Prices: A High-Frequency Empirical Analysis," Journal of Finance, American Finance Association, vol. 59(4), pages 1877-1900, 08.
  8. Bystrom, Hans N. E., 2005. "Extreme value theory and extremely large electricity price changes," International Review of Economics & Finance, Elsevier, vol. 14(1), pages 41-55.
  9. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
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  11. De Vany, Arthur S & Walls, W David, 1999. "Price Dynamics in a Network of Decentralized Power Markets," Journal of Regulatory Economics, Springer, vol. 15(2), pages 123-40, March.
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Citations

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Cited by:
  1. Angelica Gianfreda & Luigi Grossi, 2011. "Forecasting Italian Electricity Zonal Prices with Exogenous Variables," Working Papers 01/2011, University of Verona, Department of Economics.
  2. Balaguer, Jacint, 2011. "Cross-border integration in the European electricity market. Evidence from the pricing behavior of Norwegian and Swiss exporters," Energy Policy, Elsevier, vol. 39(9), pages 4703-4712, September.
  3. Aatola, Piia & Ollikainen, Markku & Toppinen, Anne, 2013. "Impact of the carbon price on the integrating European electricity market," Energy Policy, Elsevier, vol. 61(C), pages 1236-1251.
  4. Ivan Diaz-Rainey & Mathias Siems & John K. Ashton, 2011. "The financial regulation of energy and environmental markets," Journal of Financial Regulation and Compliance, Emerald Group Publishing, vol. 19(4), pages 355-369, November.
  5. Egil Ferkingstad & Anders L{\o}land & Mathilde Wilhelmsen, 2011. "Causal modeling and inference for electricity markets," Papers 1110.5429, arXiv.org.
  6. Mizrach, Bruce, 2012. "Integration of the global carbon markets," Energy Economics, Elsevier, vol. 34(1), pages 335-349.
  7. Ciarreta Antuñano, Aitor & Zárraga Alonso, Ainhoa, 2012. "Analysis of volatility transmissions in integrated and interconnected markets: The case of the Iberian and French markets," BILTOKI Biltoki;2012-04, Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística).
  8. Álvaro Cartea & Carlos González-Pedraz, 2010. "How much should we pay for interconnecting electricity markets? A real options approach," Business Economics Working Papers wb103206, Universidad Carlos III, Departamento de Economía de la Empresa.
  9. Lindström, Erik & Regland, Fredrik, 2012. "Modeling extreme dependence between European electricity markets," Energy Economics, Elsevier, vol. 34(4), pages 899-904.
  10. Ferkingstad, Egil & Løland, Anders & Wilhelmsen, Mathilde, 2011. "Causal modeling and inference for electricity markets," Energy Economics, Elsevier, vol. 33(3), pages 404-412, May.
  11. Carlo Andrea Bollino & Davide Ciferri & Paolo Polinori, 2013. "Integration and convergence in European electricity markets," Quaderni del Dipartimento di Economia, Finanza e Statistica 114/2013, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
  12. Rafik Jbir & Lanouar Charfeddine, 2012. "Short Term Relationships between European Electricity Markets," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 2(2), pages 276-281, June.

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