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Good volatility, bad volatility: What drives the asymmetric connectedness of Australian electricity markets?

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  • Apergis, Nicholas
  • Baruník, Jozef
  • Lau, Marco Chi Keung

Abstract

Efficient delivery of network services and the electricity infrastructure to meet the long-term consumer's interests are the main objectives and the strategies of a national electricity market, while the main interests of generators are to maximize their profit through pricing strategies. Therefore, the objective of this study is to explore whether electricity prices across the four Australian States display symmetric price volatility connectedness. The study is the first attempt in the literature to make use of intraday 5-min Australian dispatch electricity prices, spanning the period December 8th, 1998 to May 5th, 2016 to quantify asymmetries in volatility connectedness emerging from good, and bad volatility. The results provide supportive evidence that the Australian electricity markets are connected asymmetrically implying the presence of some degree of market power that is exercised by generators across regional electricity markets.

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  • Apergis, Nicholas & Baruník, Jozef & Lau, Marco Chi Keung, 2017. "Good volatility, bad volatility: What drives the asymmetric connectedness of Australian electricity markets?," Energy Economics, Elsevier, vol. 66(C), pages 108-115.
  • Handle: RePEc:eee:eneeco:v:66:y:2017:i:c:p:108-115
    DOI: 10.1016/j.eneco.2017.06.010
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    10. Afees A. Salisu & Raymond Swaray, 2020. "Forecasting the Return Volatility of Energy Prices: A GARCH-MIDAS Approach," World Scientific Book Chapters, in: Stéphane Goutte & Duc Khuong Nguyen (ed.), HANDBOOK OF ENERGY FINANCE Theories, Practices and Simulations, chapter 3, pages 47-71, World Scientific Publishing Co. Pte. Ltd..
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    More about this item

    Keywords

    Electricity prices; Volatility spillovers; Semivariance; Asymmetric effects; Australia National Electricity Market;
    All these keywords.

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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