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Measuring Anti-Correlations in the Nordic Electricity Spot Market by Wavelets

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  • Ingve Simonsen
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    Abstract

    We consider the Nordic electricity spot market from mid 1992 to the end of year 2000. This market is found to be well approximated by an anti-persistent self-affine (mean-reverting) walk. It is characterized by a Hurst exponent of $H\simeq 0.41$ over three orders of magnitude in time ranging from days to years. We argue that in order to see such a good scaling behavior, and to locate cross-overs, it is crucial that an analyzing technique is used that {\em decouples} scales. This is in our case achieved by utilizing a (multi-scale) wavelet approach. The shortcomings of methods that do not decouple scales are illustrated by applying, to the same dat a set, the classic $R/S$- and Fourier techniques, for which scaling regimes and/or positions of cross-overs are hard to define.

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    File URL: http://arxiv.org/pdf/cond-mat/0108033
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    Bibliographic Info

    Paper provided by arXiv.org in its series Papers with number cond-mat/0108033.

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    Date of creation: Aug 2001
    Date of revision: Apr 2003
    Publication status: Published in Physica A 322, 597 (2003).
    Handle: RePEc:arx:papers:cond-mat/0108033

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    Web page: http://arxiv.org/

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    Cited by:
    1. Qian, Xi-Yuan & Gu, Gao-Feng & Zhou, Wei-Xing, 2011. "Modified detrended fluctuation analysis based on empirical mode decomposition for the characterization of anti-persistent processes," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 390(23), pages 4388-4395.
    2. Viviana Fernandez & Brian M Lucey, 2006. "Portfolio management implications of volatility shifts: Evidence from simulated data," Documentos de Trabajo, Centro de Economía Aplicada, Universidad de Chile 219, Centro de Economía Aplicada, Universidad de Chile.
    3. Alvarez-Ramirez, Jose & Escarela-Perez, Rafael, 2010. "Time-dependent correlations in electricity markets," Energy Economics, Elsevier, Elsevier, vol. 32(2), pages 269-277, March.
    4. Martin Rypdal & Ola L{\o}vsletten, 2012. "Modeling electricity spot prices using mean-reverting multifractal processes," Papers 1201.6137, arXiv.org.
    5. Rypdal, Martin & Løvsletten, Ola, 2013. "Modeling electricity spot prices using mean-reverting multifractal processes," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 392(1), pages 194-207.
    6. Malo, Pekka, 2009. "Modeling electricity spot and futures price dependence: A multifrequency approach," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 388(22), pages 4763-4779.
    7. Michel Culot & Valérie Goffin & Steve Lawford & Sébastien De Meten & Yves Smeers, 2013. "Practical stochastic modelling of electricity prices," Post-Print, HAL hal-01021603, HAL.
    8. Rafal Weron, 2005. "Market price of risk implied by Asian-style electricity options," Econometrics, EconWPA 0502003, EconWPA.
    9. Marina Resta & Davide Sciutti, 2003. "Spot price dynamics in deregulated power markets," Econometrics, EconWPA 0312002, EconWPA.
    10. Power, Gabriel J. & Turvey, Calum G., 2010. "Long-range dependence in the volatility of commodity futures prices: Wavelet-based evidence," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 389(1), pages 79-90.
    11. Michael Bierbrauer & Stefan Trueck & Rafal Weron, 2005. "Modeling electricity prices with regime switching models," Econometrics, EconWPA 0502005, EconWPA.
    12. Weron, Rafal, 2008. "Market price of risk implied by Asian-style electricity options and futures," Energy Economics, Elsevier, Elsevier, vol. 30(3), pages 1098-1115, May.
    13. Fernandez, Viviana & Lucey, Brian M., 2007. "Portfolio management under sudden changes in volatility and heterogeneous investment horizons," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 375(2), pages 612-624.
    14. Alvarez-Ramirez, J. & Escarela-Perez, R. & Espinosa-Perez, G. & Urrea, R., 2009. "Dynamics of electricity market correlations," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 388(11), pages 2173-2188.
    15. Bierbrauer, Michael & Menn, Christian & Rachev, Svetlozar T. & Truck, Stefan, 2007. "Spot and derivative pricing in the EEX power market," Journal of Banking & Finance, Elsevier, Elsevier, vol. 31(11), pages 3462-3485, November.
    16. Serinaldi, Francesco, 2010. "Use and misuse of some Hurst parameter estimators applied to stationary and non-stationary financial time series," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 389(14), pages 2770-2781.
    17. Erzgräber, Hartmut & Strozzi, Fernanda & Zaldívar, José-Manuel & Touchette, Hugo & Gutiérrez, Eugénio & Arrowsmith, David K., 2008. "Time series analysis and long range correlations of Nordic spot electricity market data," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 387(26), pages 6567-6574.

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