Unveiling endogeneity and temporal dependence in energy prices and demand in Iberian countries: a stochastic hidden Markov model approach

Jorge Antunes, Luis Alberiko Gil-Alana, Rossana Riccardi, Aaron Tan, Peter Wanke

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

Abstract

In this paper, we analyze the temporal dependence in energy prices and demand using daily data of Portugal and Spain over the period 2007-2017. The methodology used is based on a stochastic Hidden Markov Model and the results indicate first that all significant relationships between energy prices and demands were found to be positive; second, spot prices are only time dependent on future prices and spot energy, while future energy is solely time dependent on spot energy behavior; third, future prices are not only autocorrelated but also time-dependent with spot energy and future energy demands level; and finally, spot energy is autocorrelated and time-dependent with future prices and future energy. Policy implications of the results obtained are presented at the end of the article.
Original languageEnglish
Pages (from-to)191-229
Number of pages39
JournalAnnals of Operations Research
Volume313
Issue number1
Early online date29 Jul 2021
DOIs
Publication statusPublished - 1 Jun 2022

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