An Adaptive Functional Autoregressive Forecast Model to Predict Electricity Price Curves

Ying Chen and Bo Li

Journal of Business & Economic Statistics, 2017, vol. 35, issue 3, 371-388

Abstract: We propose an adaptive functional autoregressive (AFAR) forecast model to predict electricity price curves. With time-varying operators, the AFAR model can be safely used in both stationary and nonstationary situations. A closed-form maximum likelihood (ML) estimator is derived under stationarity. The result is further extended for nonstationarity, where the time-dependent operators are adaptively estimated under local homogeneity. We provide theoretical results of the ML estimator and the adaptive estimator. Simulation study illustrates nice finite sample performance of the AFAR modeling. The AFAR model also exhibits a superior accuracy in the forecast exercise of the California electricity daily price curves compared to several alternatives.

Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:taf:jnlbes:v:35:y:2017:i:3:p:371-388

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DOI: 10.1080/07350015.2015.1092976

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