Modelling price and volatility inter-relationships in the Australian wholesale spot electricity markets

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Title Modelling price and volatility inter-relationships in the Australian wholesale spot electricity markets
Author Higgs, Helen
Journal Name Energy Economics
Editor Beng W Ang
Year Published 2009
Place of publication Netherlands
Publisher Elsevier
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 (Tse, Y.K., Tsui, A.K.C., 2002. A multivariate generalised autoregressive conditional heteroscedasticity model with time-varying correlations. Journal of Business and Economic Statistics 20 (3), 351-362.) and Engle's (Engle, R., 2002. Dynamic conditional correlation: a sample class of multivariate generalized autoregressive conditional heteroskedasticity models. Journal of Business and Economic Statistics 20 (3), 339-350.) dynamic conditional correlation multivariate GARCH models. Tse and Tsui's (Tse, Y.K., Tsui, A.K.C., 2002. A multivariate generalised autoregressive conditional heteroscedasticity model with time-varying correlations. Journal of Business and Economic Statistics 20 (3), 351-362.) 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
Alternative URI http://dx.doi.org/10.1016/j.eneco.2009.05.003
Volume 31
Issue Number 5
Edition 2009
Page from 748
Page to 756
ISSN 0140-9883
Date Accessioned 2009-08-17
Language en_AU
Research Centre Griffith Asia Institute
Faculty Griffith Business School
Subject Time-Series Analysis
URI http://hdl.handle.net/10072/29231
Publication Type Journal Articles (Refereed Article)
Publication Type Code c1

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