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

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

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.

Suggested Citation

  • George P Papaioannou & Christos Dikaiakos & Anargyros Dramountanis & Dionysios S Georgiadis & Panagiotis G Papaioannou, 2017. "Using nonlinear stochastic and deterministic (chaotic tools) to test the EMH of two Electricity Markets the case of Italy and Greece," Papers 1711.10552, arXiv.org.
    • Handle: RePEc:arx:papers:1711.10552
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    References listed on IDEAS

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    1. Karakatsani, Nektaria V. & Bunn, Derek W., 2008. "Forecasting electricity prices: The impact of fundamentals and time-varying coefficients," International Journal of Forecasting, Elsevier, vol. 24(4), pages 764-785.
    2. Ralf Becker & Stan Hurn & Vlad Pavlov, 2007. "Modelling Spikes in Electricity Prices," The Economic Record, The Economic Society of Australia, vol. 83(263), pages 371-382, December.
    3. Simonsen, Ingve & Weron, Rafal & Mo, Birger, 2004. "Structure and stylized facts of a deregulated power market," MPRA Paper 1443, University Library of Munich, Germany.
    4. Christensen, T.M. & Hurn, A.S. & Lindsay, K.A., 2012. "Forecasting spikes in electricity prices," International Journal of Forecasting, Elsevier, vol. 28(2), pages 400-411.
    5. repec:qut:auncer:2012_5 is not listed on IDEAS
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