Modelling price and volatility relationships in the Australian wholesale spot electricity markets using constant and dynamic conditional correlation multivariate GARCH models

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Title Modelling price and volatility relationships in the Australian wholesale spot electricity markets using constant and dynamic conditional correlation multivariate GARCH models
Author Higgs, Helen
Publication Title Proceedings of the 37th Australian Conference of Economists
Editor James Dick
Year Published 2008
Place of publication Brisbane, Australia
Publisher The Economic Society of Australia Inc.
Abstract This paper examines the inter-relationships of wholesale spot electricity prices among the four regional electricity markets in the Australian National Electricity Market (NEM): namely, New South Wales, Queensland, South Australia and Victoria using the constant conditional correlation and Tse and Tsui's (2002) and Engle's (2002) dynamic conditional correlation multivariate GARCH models. Tse and Tsui's (2000) dynamic conditional correlation multivariate GARCH model which takes account of the Student t specification produces the best results. At the univariate GARCH(1,1) level, the mean equations indicate the presence of positive own mean spillovers in all four markets and little evidence of mean spillovers from the other lagged markets. In the dynamic conditional correlation equation, the highest conditional correlations are evident between the well-connected markets indicating the presence of strong interdependence between these markets with weaker interdependence between the not so well-interconnected markets.
Peer Reviewed Yes
Published Yes
Publisher URI http://www.ace08.com.au/
Copyright Statement Copyright 2008 Economic Society of Australia QLD Inc. This is the author-manuscript version of this paper. Reproduced in accordance with the copyright policy of the publisher. Published by Blackwell Publishing Ltd. Please refer to the publisher's website for access to the definitive, published version.
ISBN 978-0-9591806-4-0
Conference name 37th Australian Conference of Economists ACE08
Location Gold Coast, Queensland, Australia
Date From 2008-09-30
Date To 2008-10-04
URI http://hdl.handle.net/10072/24642
Date Accessioned 2009-03-18
Language en_AU
Research Centre Griffith Asia Institute
Faculty Griffith Business School
Subject Time-Series Analysis
Publication Type Conference Publications (Full Written Paper - Refereed)
Publication Type Code e1

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