Janczura, Joanna and Weron, Rafal (2010): An empirical comparison of alternate regime-switching models for electricity spot prices.
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One of the most profound features of electricity spot prices are the price spikes. Markov regime-switching (MRS) models seem to be a natural candidate for modeling this spiky behavior. However, in the studies published so far, the goodness-of-fit of the proposed models has not been a major focus. While most of the models were elegant, their fit to empirical data has either been not examined thoroughly or the signs of a bad fit ignored. With this paper we want to fill the gap. We calibrate and test a range of MRS models in an attempt to find parsimonious specifications that not only address the main characteristics of electricity prices but are statistically sound as well. We find that the most universal and robust structure is that of an independent spike 3-regime model with heteroscedastic diffusion-type base regime dynamics and shifted spike regime distributions.
|Item Type:||MPRA Paper|
|Original Title:||An empirical comparison of alternate regime-switching models for electricity spot prices|
|Keywords:||Electricity spot price, Spikes, Markov regime-switching, Heteroscedasticity|
|Subjects:||C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation
Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q47 - Energy Forecasting
|Depositing User:||Joanna Janczura|
|Date Deposited:||14. Feb 2010 09:47|
|Last Modified:||19. Feb 2013 14:23|
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An empirical comparison of alternate regime-switching models or electricity spot prices. (deposited 07. Feb 2010 22:18)
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