Forecasting in inefficient commodity markets

Periklis Gogas and Apostolos Serletis

Journal of Economic Studies, 2009, vol. 36, issue 4, 383-392

Abstract: Purpose - This paper set out to use an autoregressive conditional heteroscedasticity (ARCH)‐type model to capture the time‐varying conditional variance of Alberta electricity prices. This is of major importance in forecasting, since ARCH‐type models allow the conditional variance to depend on elements of the information set. Design/methodology/approach - The paper uses the model to perform static and dynamic forecasts over different horizons and to compare its forecasting performance with a random walk and a moving average model. Findings - The paper provides a study of hourly electricity prices using recent advances in the financial econometrics literature. Originality/value - The contribution of the paper is its use of models of changing volatility to properly identify the type of heteroscedasticity in the data‐generation processes. This is of major importance in forecasting.

Keywords: Electricity industry; Commodity markets; Forecasting; Prices (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:jespps:v:36:y:2009:i:4:p:383-392

DOI: 10.1108/01443580910973592

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