Using nonlinear stochastic and deterministic (chaotic tools) to test the EMH of two Electricity Markets the case of Italy and Greece

George P Papaioannou, Christos Dikaiakos, Anargyros Dramountanis, Dionysios S Georgiadis and Panagiotis G Papaioannou

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Abstract: Utilization of non-linear tools to characterize the state of development of the electricity markets in Italy and Greece. This is equivalent to testing the Efficient Market Hypothesis on these markets. The tools include a variety of complexity measures like Maximal Lyapunov and Hurst exponents and HHI index for market concentration and Entropy, a measure of uncertainty and complexity in a dynamical system, applied on the electricity wholesale marginal prices PUN and SMP of Italy and Greece.Our aim is to measure the complexity and dimensionality of the manifold on which the underlying stochastic dynamical system, govenring the prices, evolve. We also use the conditional volatility of prices, which is a measure of the market risk, and its connection with stability, and Hurst exponent to investigate the properties of the fluctuations of the prices which are the footprints of the idiosyncrracies of each market.

Date: 2017-11
New Economics Papers: this item is included in nep-ene
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