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Periodic Seasonal Reg-ARFIMA-GARCH Models for Daily Electricity Spot Prices

Author

Listed:
  • Siem Jan Koopman

    () (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam)

  • Marius Ooms

    () (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam)

  • M. Angeles Carnero

    () (Dpt. Fundamentos del Analisis Economico, University of Alicante)

Abstract

This discussion paper resulted in an article in the Journal of the American Statistical Association (2007). Vol. 102, issue 477, pages 16-27. Novel periodic extensions of dynamic long memory regression models with autoregressive conditional heteroskedastic errors are considered for the analysis of daily electricity spot prices. The parameters of the model with mean and variance specifications are estimated simultaneously by the method of approximate maximum likelihood. The methods are implemented for time series of 1, 200 to 4, 400 daily price observations. Apart from persistence, heteroskedasticity and extreme observations in prices, a novel empirical finding is the importance of day-of-the-week periodicity in the autocovariance function of electricity spot prices. In particular, daily log prices from the Nord Pool power exchange of Norway are modeled effectively by our framework, which is also extended with explanatory variables. For the daily log prices of three European emerging electricity markets (EEX in Germany, Powernext in France, APX in The Netherlands), which are less persistent, periodicity is also highly significant.

Suggested Citation

  • Siem Jan Koopman & Marius Ooms & M. Angeles Carnero, 2005. "Periodic Seasonal Reg-ARFIMA-GARCH Models for Daily Electricity Spot Prices," Tinbergen Institute Discussion Papers 05-091/4, Tinbergen Institute.
  • Handle: RePEc:tin:wpaper:20050091
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    References listed on IDEAS

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    More about this item

    Keywords

    Autoregressive fractionally integrated moving average model; Generalised autoregressive conditional heteroskedasticity model; Long memory process; Periodic autoregressive model; Volatility;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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