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Can Markov regime-switching models improve power-price forecasts? Evidence from German daily power prices

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  • Kosater, Peter
  • Mosler, Karl

Abstract

Non-linear autoregressive Markov regime-switching models are intuitive. Time-series approaches for the modelling of electricity spot prices are frequently proposed. In this paper, such models are compared with an ordinary linear autoregressive model with regard to their forecast performances. The study is carried out using German daily spot-prices from the European Energy Exchange in Leipzig. Four non-linear models are used for the forecast study. The results of the study suggest that Markov regime-switching models provide better forecasts than linear models.

Suggested Citation

  • Kosater, Peter & Mosler, Karl, 2006. "Can Markov regime-switching models improve power-price forecasts? Evidence from German daily power prices," Applied Energy, Elsevier, vol. 83(9), pages 943-958, September.
    • Handle: RePEc:eee:appene:v:83:y:2006:i:9:p:943-958
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    More about this item

    Keywords

    Electricity spot prices Markov regime-switching Forecasting;

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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