An Empirical Market Microstructure Analysis of the Implied Spread Cost in the Japanese Day-Ahead Electricity Market
Historical data of system prices over 48 half-hour intra-daily intervals in the Japan Electric Power Exchange (JEPX) are analyzed. Given theoretical and graphical preliminary analysis, we extract measures of the spread between the efficient price and actual transaction price for each month from November 2006 to April 2012. The measures are based on the first-order serial covariance of transaction returns proposed by Roll (1984) and on the historical highs and lows with some bias correction proposed by Corwin and Schultz (2012). Viewed as measures of the marginal costs of trading in the JEPX, the estimated spreads are on average at least 50 times as large as the one in the well-functioning S&P500 index futures market. The traded amount of electricity does not explain the variation of spreads once the time-of-a-day fixed effects and month-specific time effect are explicitly accounted for in the panel regression.
|Date of creation:||Mar 2013|
|Contact details of provider:|| Postal: 7-22-1 Roppongi, Minato-ku, Tokyo, Japan 106-8677|
Web page: http://www.grips.ac.jp/r-center/en/discussion_papers/
More information through EDIRC
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.:
- Christie, William G & Schultz, Paul H, 1994. " Why Do NASDAQ Market Makers Avoid Odd-Eighth Quotes?," Journal of Finance, American Finance Association, vol. 49(5), pages 1813-1840, December.
- Fang, Yue, 2002. "The compass rose and random walk tests," Computational Statistics & Data Analysis, Elsevier, vol. 39(3), pages 299-310, May.
- Shane A. Corwin & Paul Schultz, 2012. "A Simple Way to Estimate Bid‐Ask Spreads from Daily High and Low Prices," Journal of Finance, American Finance Association, vol. 67(2), pages 719-760, 04.
- Jegadeesh N. & Titman S., 1995. "Short-Horizon Return Reversals and the Bid-Ask Spread," Journal of Financial Intermediation, Elsevier, vol. 4(2), pages 116-132, April.
- Seha M. Tinic, 1972. "The Economics of Liquidity Services," The Quarterly Journal of Economics, Oxford University Press, vol. 86(1), pages 79-93.
- Kanamura, Takashi & Ohashi, Kazuhiko, 2007. "A structural model for electricity prices with spikes: Measurement of spike risk and optimal policies for hydropower plant operation," Energy Economics, Elsevier, vol. 29(5), pages 1010-1032, September.
- Schultz, Paul, 2000. "Regulatory and Legal Pressures and the Costs of Nasdaq Trading," Review of Financial Studies, Society for Financial Studies, vol. 13(4), pages 917-957.
- Garman, Mark B., 1976. "Market microstructure," Journal of Financial Economics, Elsevier, vol. 3(3), pages 257-275, June.
- Crack, Timothy Falcon & Ledoit, Olivier, 1996. " Robust Structure without Predictability: The "Compass Rose" Pattern of the Stock Market," Journal of Finance, American Finance Association, vol. 51(2), pages 751-762, June.
- Haller, Andreas & Stoll, Hans R., 1989. "Market structure and transaction costs: Implied spreads in the German stock market," Journal of Banking & Finance, Elsevier, vol. 13(4-5), pages 697-708, September.
- Madhavan, Ananth, 1992.
" Trading Mechanisms in Securities Markets,"
Journal of Finance,
American Finance Association, vol. 47(2), pages 607-641, June.
- Ananth N. Madhavan, "undated". "Trading Mechanisms in Securities Markets," Rodney L. White Center for Financial Research Working Papers 16-90, Wharton School Rodney L. White Center for Financial Research.
- Stoll, Hans R & Whaley, Robert E, 1990. "Stock Market Structure and Volatility," Review of Financial Studies, Society for Financial Studies, vol. 3(1), pages 37-71. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:ngi:dpaper:12-22. 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: ()
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.