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Forecasting electricity spot market prices with a k-factor GIGARCH process

  • Diongue, Abdou Kâ
  • Guégan, Dominique
  • Vignal, Bertrand

In this article, we investigate conditional mean and conditional variance forecasts using a dynamic model following a k-factor GIGARCH process. Particularly, we provide the analytical expression of the conditional variance of the prediction error. We apply this method to the German electricity price market for the period August 15, 2000-December 31, 2002 and we test spot prices forecasts until one-month ahead forecast. The forecasting performance of the model is compared with a SARIMA-GARCH benchmark model using the year 2003 as the out-of-sample. The proposed model outperforms clearly the benchmark model. We conclude that the k-factor GIGARCH process is a suitable tool to forecast spot prices, using the classical RMSE criteria.

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Article provided by Elsevier in its journal Applied Energy.

Volume (Year): 86 (2009)
Issue (Month): 4 (April)
Pages: 505-510

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Handle: RePEc:eee:appene:v:86:y:2009:i:4:p:505-510
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  1. Dominique Guegan, 2005. "How can we Define the Concept of Long Memory? An Econometric Survey," Econometric Reviews, Taylor & Francis Journals, vol. 24(2), pages 113-149.
  2. Dominique Guegan, 2004. "How Can We Define the Long Memory Concept? An Econometric Survey," Econometric Society 2004 Australasian Meetings 361, Econometric Society.
  3. Conejo, Antonio J. & Contreras, Javier & Espinola, Rosa & Plazas, Miguel A., 2005. "Forecasting electricity prices for a day-ahead pool-based electric energy market," International Journal of Forecasting, Elsevier, vol. 21(3), pages 435-462.
  4. Ferrara, Laurent & Guegan, Dominique, 2001. "Forecasting with k-Factor Gegenbauer Processes: Theory and Applications," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 20(8), pages 581-601, December.
  5. Francis X. Diebold & Robert S. Mariano, 1994. "Comparing Predictive Accuracy," NBER Technical Working Papers 0169, National Bureau of Economic Research, Inc.
  6. Abdou Kâ Diongue & Dominique Guegan, 2008. "The k-factor Gegenbauer asymmetric Power GARCH approach for modelling electricity spot price dynamics," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00259225, HAL.
  7. Dominique Guegan, 2003. "A prospective study of the k-factor Gegenbauer processes with heteroscedastic errors and an application to inflation rates," Post-Print halshs-00201314, HAL.
  8. Dominique Guegan & Abdou Kâ Diongue & Bertrand Vignal, 2004. "A k- factor GIGARCH process : estimation and application to electricity market spot prices," Post-Print halshs-00188533, HAL.
  9. Misiorek Adam & Trueck Stefan & Weron Rafal, 2006. "Point and Interval Forecasting of Spot Electricity Prices: Linear vs. Non-Linear Time Series Models," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 10(3), pages 1-36, September.
  10. Koopman, Siem Jan & Ooms, Marius & Carnero, M. Angeles, 2007. "Periodic Seasonal Reg-ARFIMAGARCH Models for Daily Electricity Spot Prices," Journal of the American Statistical Association, American Statistical Association, vol. 102, pages 16-27, March.
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