Co-Movement Analysis of Italian and Greek Electricity Market Wholesale Prices by Using a Wavelet Approach

George P. Papaioannou, Christos Dikaiakos, George Evangelidis, Panagiotis G. Papaioannou and Dionysios S. Georgiadis
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George P. Papaioannou: Research, Technology & Development Department, Independent Power Transmission Operator (IPTO) S.A., 89 Dyrrachiou & Kifisou Street, Athens 10443, Greece
Christos Dikaiakos: Research, Technology & Development Department, Independent Power Transmission Operator (IPTO) S.A., 89 Dyrrachiou & Kifisou Street, Athens 10443, Greece
George Evangelidis: Research, Technology & Development Department, Independent Power Transmission Operator (IPTO) S.A., 89 Dyrrachiou & Kifisou Street, Athens 10443, Greece
Panagiotis G. Papaioannou: Applied Mathematics and Physical Sciences, National Technical University of Athens, Zografou 15780, Greece
Dionysios S. Georgiadis: Department of Management, Technology and Economics, ETH Zurich, Chair of Entrepreneurial Risks, Zurich 8092, Switzerland

Energies, 2015, vol. 8, issue 10, 1-30

Abstract: We study the co-evolution of the dynamics or co-movement of two electricity markets, the Italian and Greek, by studying the dynamics of their wholesale day-ahead prices, simultaneously in the time-frequency domain. Co-movement is alternatively referred as market integration in financial economics and markets are internationally integrated if the reward for risk is identical regardless the market one trades in. The innovation of this work is the application of wavelet analysis and more specifically the wavelet coherence to estimate the dynamic interaction between these two prices. Our method is compared to other generic econometric tools used in Economics and Finance namely the dynamic correlation and coherence analysis, to study the co-movement of variables of the type related to these two fields. Our study reveals valuable information that we believe will be extremely useful to the authorities as well as other agents participating in these markets to better prepare the national markets towards the European target model, a framework in which the two markets will be coupled.

Keywords: electricity markets; co-movement; wavelets; dynamic correlation; cohesion; european target model; flows against price differential (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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