Modeling the distribution of day-ahead electricity returns: a comparison
AbstractThis paper contributes to the characterization of the probability density of the price returns in some European day-ahead electricity markets (NordPool, APX, Powernext) by fitting flexible and general families of distributions, such as the α-stable, Normal Inverse Gaussian (NIG), Exponential Power (EP), and Asymmetric Exponential Power (AEP) distributions, and comparing their goodness of fit. The α-stable and the NIG systematically outperform the EP and AEP models, but the tail behavior and the skewness are sensitive to the definition of the returns and to the deseasonalization methods. In particular, the logarithmic transform and volatility rescaling tend to dampen the extreme returns.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Quantitative Finance.
Volume (Year): 12 (2012)
Issue (Month): 12 (December)
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Other versions of this item:
- Sandro Sapio, 2009. "Modelling the distribution of day-ahead electricity returns: a comparison," LEM Papers Series 2009/21, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
- C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
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