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Realized volatility and price spikes in electricity markets: The importance of observation frequency

  • Ullrich, Carl J.
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    This paper uses high frequency spot price data from eight wholesale electricity markets in Australia, Canada, and the United States to estimate realized volatility and the frequency of price spikes. I find similar levels of realized volatility in Australia and North America, with estimates ranging from 1500% to 2700%, much greater than estimates reported previously in the literature. In hourly data, the frequency of price spikes ranges from approximately 35% to 40% in seven of eight markets. I present evidence that increasing the lag length in the calculation of bipower variation improves jump detection in electricity prices.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0140988312001399
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    Article provided by Elsevier in its journal Energy Economics.

    Volume (Year): 34 (2012)
    Issue (Month): 6 ()
    Pages: 1809-1818

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    Handle: RePEc:eee:eneeco:v:34:y:2012:i:6:p:1809-1818
    Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

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    15. Lester Hadsell, Achla Marathe and Hany A. Shawky, 2004. "Estimating the Volatility of Wholesale Electricity Spot Prices in the US," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 23-40.
    16. Helen Higgs & Andrew C Worthington, 2004. "Systematic Features of High-Frequency Volatility in Australian Electricity Markets: Intraday Patterns, Information Arrival and Calendar Effects," School of Economics and Finance Discussion Papers and Working Papers Series 186, School of Economics and Finance, Queensland University of Technology.
    17. Goto, Mika & Karolyi, G. Andrew, 2004. "Understanding Electricity Price Volatility within and across Markets," Working Paper Series 2004-12, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
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