An hour-ahead prediction model for heavy-tailed spot prices

Jae Ho Kim and Warren B. Powell

Energy Economics, 2011, vol. 33, issue 6, 1252-1266

Abstract: We propose an hour-ahead prediction model for electricity prices that capture the heavy tailed behavior that we observe in the hourly spot market in the Ercot (Texas) and the PJM West hub grids. We present a model according to which we separate the price process into a thin-tailed trailing median process and a heavy-tailed residual process whose probability distribution can be approximated by a Cauchy distribution. We show empirical evidence that supports our model.

Keywords: Heavy-tail; Median-reversion; Mean-reversion; Electricity spot market (search for similar items in EconPapers)
JEL-codes: C32 C5 C54 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:33:y:2011:i:6:p:1252-1266

DOI: 10.1016/j.eneco.2011.06.007

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