An Empirical Analysis of Liquidity and its Determinants in The German Intraday Market for Electricity

Simon Hagemann () and Christoph Weber ()
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Christoph Weber: Chair for Management Sciences and Energy Economics, University of Duisburg-Essen

No 1317, EWL Working Papers from University of Duisburg-Essen, Chair for Management Science and Energy Economics

Abstract: This paper presents a theoretical and empirical analysis of liquidity in the German intraday market for electricity. Two models that aim at explaining intraday liquidity are developed. The first model considers the fundamental merit-order and intraday adjustment needs as the drivers of liquidity in a perfectly competitive market. The second model relaxes the assumption of perfect competition in the intraday market and assumes that the trading behavior of profit maximizing market participants influences the liquidity provision. The relevance of commonly used liquidity indicators like the bid ask-spread, resiliency, market depth, price variance, delay and search costs as well as trading volume and the number of trades are analyzed with respect to both models of liquidity. The empirical findings indicate that liquidity in the German intraday market can be explained by the trading model while the purely fundamental model is rejected.

Keywords: Intraday market; electricity; liquidity; fundamental model; trading model (search for similar items in EconPapers)
JEL-codes: L94 Q41 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2013-10, Revised 2013-10
New Economics Papers: this item is included in nep-ene, nep-eur, nep-mst, nep-net and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:dui:wpaper:1317

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