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Market Structure and the Stability and Volatility of Electricity Prices

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Author Info

  • Bask, Mikael

    ()
    (Department of Economics, Stanford University)

  • Widerberg, Anna

    ()
    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

By using a novel approach in this paper,(lambda,sigma²)-analysis, we have found that electricity prices most of the time have increased in stability and decreased in volatility when the Nordic power market has expanded and the degree of competition has increased. That electricity prices at Nord Pool have been generated by a stochastic dynamic system that most often has become more stable during the step-wise integration of the Nordic power market means that this market is less sensitive to shocks after the integration process than it was before this process. This is good news.

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File URL: http://hdl.handle.net/2077/18659
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Bibliographic Info

Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 327.

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Length: 40 pages
Date of creation: 06 Nov 2008
Date of revision:
Handle: RePEc:hhs:gunwpe:0327

Contact details of provider:
Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Related research

Keywords: Electricity Prices; GARCH Models; Lyapunov Exponents; Market Structure; Reconstructed Dynamics; Stability; Volatility;

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References

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  1. Lundgren, Jens & Hellström, Jörgen & Rudholm, Niklas, 2008. "Multinational Electricity Market Integration and Electricity Price Dynamics," HUI Working Papers 16, HUI Research.
  2. Bask, Mikael & de Luna, Xavier, 2001. "Characterizing the degree of stability of non-linear dynamic models," UmeÃ¥ Economic Studies 564, Umeå University, Department of Economics.
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  17. Glosten, Lawrence R & Jagannathan, Ravi & Runkle, David E, 1993. " On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks," Journal of Finance, American Finance Association, vol. 48(5), pages 1779-1801, December.
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Citations

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Cited by:
  1. Bask, Mikael, 2010. "Measuring potential market risk," Journal of Financial Stability, Elsevier, vol. 6(3), pages 180-186, September.
  2. Angelica Gianfreda & Luigi Grossi, 2011. "Forecasting Italian Electricity Zonal Prices with Exogenous Variables," Working Papers 01/2011, University of Verona, Department of Economics.
  3. Sueyoshi, Toshiyuki, 2010. "An agent-based approach with collaboration among agents: Estimation of wholesale electricity price on PJM and artificial data generated by a mean reverting model," Energy Economics, Elsevier, vol. 32(5), pages 1025-1033, September.
  4. HFrance Krizanic & Zan Jan Oplotnik, 2013. "Market Changes, Business Cycles and Fluctuations in Electricity Prices - EU Evidence from Germany and Slovenia," International Journal of Energy Economics and Policy, Econjournals, vol. 3(2), pages 118-126.

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