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

Author

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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
    Center for Research and Applications in Nonlinear Systems (CRANS), Department of Mathematics, University of Patras, Patras 26500, Greece)

  • Christos Dikaiakos

    (Research, Technology & Development Department, Independent Power Transmission Operator (IPTO) S.A., 89 Dyrrachiou & Kifisou Street, Athens 10443, Greece
    These authors contributed equally to this work.)

  • George Evangelidis

    (Research, Technology & Development Department, Independent Power Transmission Operator (IPTO) S.A., 89 Dyrrachiou & Kifisou Street, Athens 10443, Greece
    These authors contributed equally to this work.)

  • Panagiotis G. Papaioannou

    (Applied Mathematics and Physical Sciences, National Technical University of Athens, Zografou 15780, Greece
    These authors contributed equally to this work.)

  • Dionysios S. Georgiadis

    (Department of Management, Technology and Economics, ETH Zurich, Chair of Entrepreneurial Risks, Zurich 8092, Switzerland
    These authors contributed equally to this work.)

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.

Suggested Citation

  • George P. Papaioannou & Christos Dikaiakos & George Evangelidis & Panagiotis G. Papaioannou & Dionysios S. Georgiadis, 2015. "Co-Movement Analysis of Italian and Greek Electricity Market Wholesale Prices by Using a Wavelet Approach," Energies, MDPI, vol. 8(10), pages 1-30, October.
    • Handle: RePEc:gam:jeners:v:8:y:2015:i:10:p:11770-11799:d:57403
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    References listed on IDEAS

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    Cited by:

    1. Papaioannou, George P. & Dikaiakos, Christos & Dagoumas, Athanasios S. & Dramountanis, Anargyros & Papaioannou, Panagiotis G., 2018. "Detecting the impact of fundamentals and regulatory reforms on the Greek wholesale electricity market using a SARMAX/GARCH model," Energy, Elsevier, vol. 142(C), pages 1083-1103.
    2. Cheng Xin & Kailin Ji & Hao Chang & Yang Li & Ya-Qiong Liu, 2022. "Price Co-Movement between Electrical Equipment and Metal Commodities—A Time-Frequency Analysis," Sustainability, MDPI, vol. 14(20), pages 1-18, October.
    3. Josué M. Polanco-Martínez & Luis M. Abadie, 2016. "Analyzing Crude Oil Spot Price Dynamics versus Long Term Future Prices: A Wavelet Analysis Approach," Energies, MDPI, vol. 9(12), pages 1-19, December.

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