Forecasting electricity prices: The impact of fundamentals and time-varying coefficients
This paper investigates the day-ahead forecasting performance of fundamental price models for electricity spot prices, intended to capture: (i) the impacts of economic, technical, strategic and risk factors on intra-day prices; and (ii) the dynamics of these effects over time. A time-varying parameter (TVP) regression model allows for a continuously adaptive price structure, due to agent learning, regulatory and market structure changes. A regime-switching regression model allows for discontinuities in pricing due to temporal irregularities and scarcity effects. The models that invoke market fundamentals and time-varying coefficients exhibit the best predictive performance among various alternatives, in the British market.
Year of publication: |
2008
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Authors: | Karakatsani, Nektaria V. ; Bunn, Derek W. |
Published in: |
International Journal of Forecasting. - Elsevier, ISSN 0169-2070. - Vol. 24.2008, 4, p. 764-785
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Publisher: |
Elsevier |
Keywords: | Electricity prices Forecasting Time-varying effects Regime-switching |
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