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DCCA analysis of renewable and conventional energy prices

Aureliano Sancho Souza Paiva, Miguel Angel Rivera-Castro and Roberto Fernandes Silva Andrade

Physica A: Statistical Mechanics and its Applications, 2018, vol. 490, issue C, 1408-1414

Abstract: Here we investigate the inter-influence of oil prices and renewable energy sources. The non-stationary time series are scrutinized within the Detrended Cross-Correlation Analysis (DCCA) framework, where the resulting DCCA coefficient provides a useful and reliable index to the evaluate the cross correlation between events at the same time instant as well as at a suitably chosen time lags. The analysis is based on the quotient of two successive daily closing oil prices and composite indices of renewable energy sources in USA and Europe in the period 2006–2015, which was subject to several social and economic driving forces, as the increase of social pressure in favor of the use of non-fossil energy sources and the worldwide economic crisis that started in 2008. The DCCA coefficient is evaluated for different window sizes, extracting information for short and long term correlation between the indices. Particularly, strong correlation between the behavior of the two distinct economic sectors are observed for large time intervals during the worst period of the economic crisis (2008–2012), hinting at a very cautious behavior of the economic agents. Before and after this period, the behavior of two economic sectors are overwhelmingly uncorrelated or very weakly correlated. The results reported here may be useful to select proper strategies in future similar scenarios.

Keywords: Detrended cross-correlation analysis; Energy market; Oil; Renewable energy sources (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:phsmap:v:490:y:2018:i:c:p:1408-1414