A Robust Multivariate Long Run Analysis of European Electricity Prices

Research, Preprint OPEN
Matteo Pelagatti ; Bruno Bosco ; Lucia Parisio ; Fabio Baldi (2007)
  • Publisher: Milano: Fondazione Eni Enrico Mattei (FEEM)
  • Subject: Interdependencies | Equilibrium Correction Model | C32 | D44 | C15 | L94 | Kointegration | EU-Staaten | European Electricity Prices, Cointegration, Interdependencies, Equilibrium Correction Model, Oil Prices | Großhandel | Elektrizitätswirtschaft | Q40 | European electricity prices, Cointegration, Interdependencies, Equilibrium Correction model, Oil prices, Robustness | Cointegration | Stromtarif | European Electricity Prices | Oil Prices
    • jel: jel:D44 | jel:C32 | jel:C15 | jel:L94 | jel:Q40
      ddc: ddc:330

This paper analyses the interdependencies existing in wholesale electricity prices in six major European countries. The results of our robust multivariate long run dynamic analysis reveal the presence of four highly integrated central European markets (France, Germany, the Netherlands and Austria). The trend shared by these four electricity markets appears to be common also to gas prices, but not to oil prices. The existence of long term dynamics among electricity prices and between electricity prices and gas prices may prove to be important for long term hedging operations to be conducted even in countries where well established and liquid electricity derivatives markets are not present. Since standard unit root and cointegration tests are not robust to the peculiar characteristics of electricity prices time series, we adapt and further develop a battery of robust inference procedures that should assure the reliability of our results.
  • References (28)
    28 references, page 1 of 3

    Andrews, D.W.K. (1991). Heteroscedasticity and autocorrelation consistent covariance matrix estimation. Econometrica 59, 817-858.

    Armostrong, M. and A. Galli (2005). Are day-ahead prices for electricity converging in continental Europe? An exploratory data approach. Working Paper CERNA, February.

    Arranz, M.A. and A. Escribano (2004). Outliers-robust ECM cointegration tests based on the trend components. Spanish Economic Review 6, 243-266.

    Atkins, F.J. and J. Chen (2002). Some statistical properties of deregulated electricity prices in Alberta. University of Calgary, Department of economics, Discussion paper 2002-06.

    Bahnot, K. (2000). Behavior of power prices: implications for the valuation and hedging of financial contracts. Journal of Risk 2(3).

    Boisselau, F. (2004). The role of power exchanges for the creation of a single European electricity market: market design and market regulation. Delft: Delft University Press.

    Bosco, B., L. Parisio and M. Pelagatti (2006). Deregulated Wholesale Electricity Prices in Italy. An empirical analysis, International Advances in Economic Research, (forthcoming).

    Boswijk, P.H. (2000). Testing for a Unit Root with Near-Integrated Volatility. Working paper, Department of Quantitative Economics, Universiteit van Amsterdam.

    Franses, P.H. and A. Lucas (1998). Outlier detection in cointegration analysis. Journal of Business and Economic Statistics 16, 459-468.

    Haldrup, N. and M.Ø. Nielsen (2006). A regime switching long memory model for electricity prices. Journal of Econometrics 135, 349376.

  • Similar Research Results (1)
  • Metrics
    No metrics available
Share - Bookmark