Quantifying multiscale inefficiency in electricity markets

Olga Y. Uritskaya and Apostolos Serletis

Energy Economics, 2008, vol. 30, issue 6, 3109-3117

Abstract: One of the basic features of efficient markets is the absence of correlations between price increments over any time scale leading to random walk-type behavior of prices. In this paper, we propose a new approach for measuring deviations from the efficient market state based on an analysis of scale-dependent fractal exponent characterizing correlations at different time scales. The approach is applied to two electricity markets, Alberta and Mid Columbia (Mid-C), as well as to the AECO Alberta natural gas market (for purposes of providing a comparison between storable and non-storable commodities). We show that price fluctuations in all studied markets are not efficient, with electricity prices exhibiting complex multiscale correlated behavior not captured by monofractal methods used in previous studies.

Keywords: Efficient; market; hypothesis; Random; walk; Power; laws; Detrended; fluctuation; analysis (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:30:y:2008:i:6:p:3109-3117

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