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On the importance of the long-term seasonal component in day-ahead electricity price forecasting

Listed author(s):
  • Nowotarski, Jakub
  • Weron, Rafał

In day-ahead electricity price forecasting (EPF) the daily and weekly seasonalities are always taken into account, but the long-term seasonal component (LTSC) is believed to add unnecessary complexity to the already parameter-rich models and is generally ignored. Conducting an extensive empirical study involving state-of-the-art time series models we show that (i) decomposing a series of electricity prices into a LTSC and a stochastic component, (ii) modeling them independently and (iii) combining their forecasts can bring – contrary to a common belief – an accuracy gain compared to an approach in which a given time series model is calibrated to the prices themselves.

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File URL: http://www.sciencedirect.com/science/article/pii/S014098831630127X
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Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 57 (2016)
Issue (Month): C ()
Pages: 228-235

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Handle: RePEc:eee:eneeco:v:57:y:2016:i:c:p:228-235
DOI: 10.1016/j.eneco.2016.05.009
Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

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