Table of contents alert
Do you want to receive an email alert about new issue?


Volume 62, Issue 2


Independent Spike Models: Estimation and Validation

Lindström, Erik; Regland, Fredric

Year: 2012   Volume: 62   Issue: 2   Pages: 180-196

Abstract: The authors apply a class of Markov switching models (independent spike models) to six European electricity markets and two European gas markets. This paper extends the current framework by introducing Gamma distributed spikes, which improves the fit for most energy markets. The models are quite complex. The robustness of the estimates is therefore evaluated using three different estimation strategies: direct maximization of the likelihood function, the Expectation-Maximization algorithm, and Markov Chain Monte Carlo (MCMC). The seasonal variation is corrected for by using the month-ahead forward price as a predictor. The models provide good empirical results for most markets.

JEL classification: C22, C53, G17, Q4

Keywords: regime switching models, electricity spot prices, independent spike models, gamma distribution


RePEc: http://ideas.repec.org/a/fau/fauart/v62y2012i2p180-196.html

pdf Attachment [PDF] print Print   Recommend to others Recommend to others