Some statistical investigations on the nature and dynamics of electricity prices
This work analyzes the log-returns of daily electricity prices from the NordPool day-ahead market. We study both the unconditional growth rates distribution and the distribution of residual shocks obtained with a non-parametric filtering procedure based on the Cholesky factor algorithm. We show that, even if the Subbotin family of distributions is able to describe the empirical observations in both cases, the Subbotin fit obtained for the unconditional growth rates and for the residual shocks reveal significant differences. Indeed, the sequence of log-returns can be described as the outcome of an aggregation of Laplace-distributed shocks with time-dependent volatility. We find that the standard deviation of shocks scales as a power law of the initial price level, with scaling exponent around -1. Moreover, the analysis of the empirical density of shocks, conditional on the price level, shows a strong relationship of the Subbotin fit with the latter. We conclude that the unconditional growth rates distribution is the superposition of shocks distributions characterized by decreasing volatility and fat-tailedness with respect to the price level.
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): 355 (2005)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/|
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.:
- repec:dau:papers:123456789/12331 is not listed on IDEAS
- Bystrom, Hans N. E., 2005.
"Extreme value theory and extremely large electricity price changes,"
International Review of Economics & Finance,
Elsevier, vol. 14(1), pages 41-55.
- Byström, Hans, 2001. "Extreme Value Theory and Extremely Large Electricity Price Changes," Working Papers 2001:19, Lund University, Department of Economics.
- Niels Haldrup & Morten O. Nielsen, 2004.
"A Regime Switching Long Memory Model for Electricity Prices,"
Economics Working Papers
2004-2, Department of Economics and Business Economics, Aarhus University.
- Haldrup, Niels & Nielsen, Morten Orregaard, 2006. "A regime switching long memory model for electricity prices," Journal of Econometrics, Elsevier, vol. 135(1-2), pages 349-376.
- Youngki Lee & Luis A. N. Amaral & David Canning & Martin Meyer & H. Eugene Stanley, 1998. "Universal features in the growth dynamics of complex organizations," Papers cond-mat/9804100, arXiv.org.
- Francis X. Diebold & Lee E. Ohanian & Jeremy Berkowitz, 1995.
"Dynamic Equilibrium Economies: A Framework for Comparing Models and Data,"
NBER Technical Working Papers
0174, National Bureau of Economic Research, Inc.
- Francis X. Diebold & Lee E. Ohanian & Jeremy Berkowitz, 1998. "Dynamic Equilibrium Economies: A Framework for Comparing Models and Data," Review of Economic Studies, Oxford University Press, vol. 65(3), pages 433-451.
- Francis X. Diebold & Lee E. Ohanian & Jeremy Berkowitz, 1998. "Dynamic equilibrium economies: a framework for comparing models and data," Staff Report 243, Federal Reserve Bank of Minneapolis.
- Francis X. Diebold & Lee E. Ohanian & Jeremy Berkowitz, 1997. "Dynamic equilibrium economies: a framework for comparing models and data," Finance and Economics Discussion Series 1997-23, Board of Governors of the Federal Reserve System (U.S.).
- Francis X. Diebold & Lee E. Ohanian & Jeremy Berkowitz, 1997. "Dynamic equilibrium economies: a framework for comparing models and data," Working Papers 97-7, Federal Reserve Bank of Philadelphia.
- Jeremy Berkowitz & Lutz Kilian, 2000.
"Recent developments in bootstrapping time series,"
Taylor & Francis Journals, vol. 19(1), pages 1-48.
- Jeremy Berkowitz & Lutz Kilian, "undated". "Recent Developments in Bootstrapping Time Series," Finance and Economics Discussion Series 1996-45, Board of Governors of the Federal Reserve System (U.S.).
- Jeremy Berkowitz & Lutz Kilian, 1996. "Recent developments in bootstrapping time series," Finance and Economics Discussion Series 96-45, Board of Governors of the Federal Reserve System (U.S.).
- von der Fehr, Nils-Henrik Morch & Harbord, David, 1993.
"Spot Market Competition in the UK Electricity Industry,"
Royal Economic Society, vol. 103(418), pages 531-546, May.
- Von der Fehr, N.H.M. & Harbord, D., 1992. "Spot Market Competition in the UK Electricity Industry," Memorandum 09/1992, Oslo University, Department of Economics.
- Sandro Sapio, 2004.
"Markets Design, Bidding Rules, and Long Memory in Electricity Prices,"
Revue d'Économie Industrielle,
Programme National Persée, vol. 107(1), pages 151-170.
- Sandro Sapio, 2004. "Market Design, Bidding Rules, and Long Memory in Electricity Prices," LEM Papers Series 2004/07, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
- Bottazzi, Giulio & Secchi, Angelo, 2003. "Why are distributions of firm growth rates tent-shaped?," Economics Letters, Elsevier, vol. 80(3), pages 415-420, September.
- Merton, Robert C., 1976.
"Option pricing when underlying stock returns are discontinuous,"
Journal of Financial Economics,
Elsevier, vol. 3(1-2), pages 125-144.
- Merton, Robert C., 1975. "Option pricing when underlying stock returns are discontinuous," Working papers 787-75., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- S. James Press, 1967. "A Compound Events Model for Security Prices," The Journal of Business, University of Chicago Press, vol. 40, pages 1-317.
- Weron, R & Bierbrauer, M & Trück, S, 2004.
"Modeling electricity prices: jump diffusion and regime switching,"
Physica A: Statistical Mechanics and its Applications,
Elsevier, vol. 336(1), pages 39-48.
- Rafal Weron & Michael Bierbrauer & Stefan Trück, 2003. "Modeling electricity prices: jump diffusion and regime switching," HSC Research Reports HSC/03/01, Hugo Steinhaus Center, Wroclaw University of Technology.
- Joskow, Paul L, 1996. "Introducing Competition into Regulated Network Industries: From Hierarchies to Markets in Electricity," Industrial and Corporate Change, Oxford University Press, vol. 5(2), pages 341-382.
- Knittel, Christopher R. & Roberts, Michael R., 2005. "An empirical examination of restructured electricity prices," Energy Economics, Elsevier, vol. 27(5), pages 791-817, September.
- Giulio Bottazzi & Sandro Sapio & Angelo Secchi, 2004.
"Some Statistical Investigations on the Nature and Dynamics of Electricity Prices,"
LEM Papers Series
2004/13, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
- Bottazzi, G. & Sapio, S. & Secchi, A., 2005. "Some statistical investigations on the nature and dynamics of electricity prices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 355(1), pages 54-61.
- Lucia, Julio J. & Schwartz, Eduardo, 2000. "Electricity prices and power derivatives: Evidence from the Nordic Power Exchange," University of California at Los Angeles, Anderson Graduate School of Management qt12w8v7jj, Anderson Graduate School of Management, UCLA.
- Peña Sánchez de Rivera, Juan Ignacio & Escribano, Álvaro & Villaplana, Pablo, 2002.
"Modeling electricity prices: international evidence,"
UC3M Working papers. Economics
we022708, Universidad Carlos III de Madrid. Departamento de Economía.
- Alvaro Escribano & J. Ignacio Peña & Pablo Villaplana, 2011. "Modelling Electricity Prices: International Evidence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 73(5), pages 622-650, October.
- Catherine D. Wolfram, 1999. "Measuring Duopoly Power in the British Electricity Spot Market," American Economic Review, American Economic Association, vol. 89(4), pages 805-826, September.
- Berkowitz, J. & Birgean, I. & Kilian, L., 1999.
"On the Finite-Sample Accuracy of Nonparametric Resampling Algorithms for Economic Time Series,"
99-01, Michigan - Center for Research on Economic & Social Theory.
- Jeremy Berkowitz & Ionel Biegean & Lutz Kilian, 1999. "On the finite-sample accuracy of nonparametric resampling algorithms for economic time series," Finance and Economics Discussion Series 1999-04, Board of Governors of the Federal Reserve System (U.S.).
When requesting a correction, please mention this item's handle: RePEc:eee:phsmap:v:355:y:2005:i:1:p:54-61. 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: (Shamier, Wendy)
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.