MODELLING PRICE DYNAMICS IN TURKISH ELECTRICITY MARKET: LESSONS FROM GARCH ESTIMATES | Zendy

Talat Ulussever | Zendy; Mehmet Ali Soytaş | Zendy; Hasan Murat Ertuğrul | Zendy

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MODELLING PRICE DYNAMICS IN TURKISH ELECTRICITY MARKET: LESSONS FROM GARCH ESTIMATES

Author(s) -

Talat Ulussever,

Mehmet Ali Soytaş,

Hasan Murat Ertuğrul

Publication year - 2018

Publication title -

m u iktisadi ve idari bilimler dergisi

Language(s) - English

Resource type - Journals

ISSN - 1300-7262

DOI - 10.14780/muiibd.384221

Subject(s) - volatility (finance) , autoregressive conditional heteroskedasticity , econometrics , economics , electricity price , electricity market , electricity , spot contract , turkish , financial economics , engineering , linguistics , philosophy , futures contract , electrical engineering

In this paper, we estimate electricity market volatility in Turkey using various GARCH-class models. Spot price in Turkish electricity market exhibits significant variation and therefore, conditional modelling of the volatility can make us better understand the price dynamics of this important market. We estimate volatilities of weekly prices over the period of January 2010 to April 2017 and compare the performance of various GARCH models that take into account the asymmetric effects, possible mean effects of the volatility, fat-tails of the distribution and persistence of the volatility series. We found time varying volatility is an important feature of the price dynamics in Turkish electricity market and additionally, in modelling volatility, paying attention to the extreme price changes via heavy tailed distributions improves the model fit substantially.

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