Modelling Electricity Prices: International Evidence
This paper analyses the evolution of electricity prices in deregulated markets. We present a general model that simultaneously takes into account the possibility of several factors: seasonality, mean reversion, GARCH behaviour and time-dependent jumps. The model is applied to equilibrium spot prices of electricity markets from Argentina, Australia (Victoria), New Zealand (Hayward), NordPool (Scandinavia), Spain and U.S. (PJM) using daily data. Six different nested models were estimated to compare the relative importance of each factor and their interactions. We obtained that electricity prices are mean-reverting with strong volatility (GARCH) and jumps of time-dependent intensity even after adjusting for seasonality. We also provide a detailed unit root analysis of electricity prices against mean reversion, in the presence of jumps and GARCH errors, and propose a new powerful procedure based on bootstrap techniques.
(This abstract was borrowed from another version of this item.)
If 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.
Volume (Year): 73 (2011)
Issue (Month): 5 (October)
|Contact details of provider:|| Postal: Manor Rd. Building, Oxford, OX1 3UQ|
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0305-9049
More information through EDIRC
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=0305-9049|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Natalia Fabra & Juan Toro, 2001.
"Price Wars and Collusion in the Spanish Electricity Market,"
Economic Working Papers at Centro de Estudios Andaluces
E2001/05, Centro de Estudios Andaluces.
- Fabra, Natalia & Toro, Juan, 2005. "Price wars and collusion in the Spanish electricity market," International Journal of Industrial Organization, Elsevier, vol. 23(3-4), pages 155-181, April.
- Natalia Fabra & Juan Toro, 2002. "Price Wars and Collusion in the Spanish Electricity Market," Industrial Organization 0212001, EconWPA, revised 31 Aug 2003.
- Juan Toro & Natalia Fabra, 2002. "Price Wars and Collusion in the Spanish Electricity Market," Economics Series Working Papers 136, University of Oxford, Department of Economics.
- Das, Sanjiv Ranjan & Sundaram, Rangarajan K., 1999.
"Of Smiles and Smirks: A Term Structure Perspective,"
Journal of Financial and Quantitative Analysis,
Cambridge University Press, vol. 34(02), pages 211-239, June.
- Sanjiv R. Das & Rangarajan K. Sundaram, 1998. "Of Smiles and Smirks: A Term-Structure Perspective," New York University, Leonard N. Stern School Finance Department Working Paper Seires 98-024, New York University, Leonard N. Stern School of Business-.
- Mármol, Francesc & Escribano, Álvaro & Arranz, Miguel A., 2002. "Effects of Applying Linear and Nonlinear Filters on Tests for Unit Roots with Additive Outliers," UC3M Working papers. Economics we20091101, Universidad Carlos III de Madrid. Departamento de Economía.
- Bollerslev, T. & Ghysels, E., 1994.
"Periodic Autoregressive Conditional Heteroskedasticity,"
Cahiers de recherche
9408, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Bollerslev, Tim & Ghysels, Eric, 1996. "Periodic Autoregressive Conditional Heteroscedasticity," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(2), pages 139-151, April.
- Bollerslev, T. & Ghysels, E., 1994. "Periodic Autoregressive Conditional Heteroskedasticity," Cahiers de recherche 9408, Universite de Montreal, Departement de sciences economiques.
- Tim Bollerslev, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
EERI Research Paper Series
EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
- Eduardo Schwartz & James E. Smith, 2000. "Short-Term Variations and Long-Term Dynamics in Commodity Prices," Management Science, INFORMS, vol. 46(7), pages 893-911, July.
- Lucas, André, 1995. "Unit Root Tests Based on M Estimators," Econometric Theory, Cambridge University Press, vol. 11(02), pages 331-346, February.
- Ernst R. Berndt & Bronwyn H. Hall & Robert E. Hall & Jerry A. Hausman, 1974. "Estimation and Inference in Nonlinear Structural Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 3, number 4, pages 653-665 National Bureau of Economic Research, Inc.
- Kim, Kiwhan & Schmidt, Peter, 1993. "Unit root tests with conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 59(3), pages 287-300, October.
- Bergstrom, A. R., 1988. "The History of Continuous-Time Econometric Models," Econometric Theory, Cambridge University Press, vol. 4(03), pages 365-383, December.
- Schwartz, Eduardo S, 1997. " The Stochastic Behavior of Commodity Prices: Implications for Valuation and Hedging," Journal of Finance, American Finance Association, vol. 52(3), pages 923-973, July.
- Pindyck, Robert S., 1998.
"The long-run evolution of energy prices,"
WP 4044-98., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Christopher J. Neely, 1998.
"Target zones and conditional volatility: the role of realignments,"
1994-008, Federal Reserve Bank of St. Louis.
- Neely, Christopher J., 1999. "Target zones and conditional volatility: The role of realignments," Journal of Empirical Finance, Elsevier, vol. 6(2), pages 177-192, April.
- H. Peter Boswijk & Jurgen A. Doornik, 1999.
"Distribution Approximations for Cointegration Tests with Stationary Exogenous Regressors,"
Tinbergen Institute Discussion Papers
99-013/4, Tinbergen Institute.
- Jurgen A. Doornik & H. Peter Boswijk, 2005. "Distribution approximations for cointegration tests with stationary exogenous regressors," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(6), pages 797-810.
- Boswijk, H.P., 2000.
"Testing for a Unit Root with Near-Integrated Volatility,"
CeNDEF Working Papers
00-09, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
- H. Peter Boswijk, 2000. "Testing for a Unit Root with Near-Integrated Volatility," Econometric Society World Congress 2000 Contributed Papers 1101, Econometric Society.
- H. Peter Boswijk, 2001. "Testing for a Unit Root with Near-Integrated Volatility," Tinbergen Institute Discussion Papers 01-077/4, Tinbergen Institute.
- repec:reg:rpubli:394 is not listed on IDEAS
- Philippe Jorion, 1988. "On Jump Processes in the Foreign Exchange and Stock Markets," Review of Financial Studies, Society for Financial Studies, vol. 1(4), pages 427-445.
- Knittel, Christopher R. & Roberts, Michael R., 2005. "An empirical examination of restructured electricity prices," Energy Economics, Elsevier, vol. 27(5), pages 791-817, September.
- Ángel León & Antonio Rubia, 2001. "Comportamiento Del Precio Y Volatilidad En El Pool Eléctrico Español," Working Papers. Serie EC 2001-04, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- Nelson, Daniel B., 1990. "Stationarity and Persistence in the GARCH(1,1) Model," Econometric Theory, Cambridge University Press, vol. 6(03), pages 318-334, September.
- Nieuwland, Frederick G M C & Verschoor, Willem F C & Wolff, Christian C P, 1994. "Stochastic trends and jumps in EMS exchange rates," Journal of International Money and Finance, Elsevier, vol. 13(6), pages 699-727, December.
- Lucas, Andre, 1995. "An outlier robust unit root test with an application to the extended Nelson-Plosser data," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 153-173.
- Vlaar, Peter J G & Palm, Franz C, 1993. "The Message in Weekly Exchange Rates in the European Monetary System: Mean Reversion, Conditional Heteroscedasticity, and Jumps," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(3), pages 351-360, July.
When requesting a correction, please mention this item's handle: RePEc:bla:obuest:v:73:y:2011:i:5:p:622-650. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
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.