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

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
Number of pages39
JournalAnnals of Operations Research
Early online date29 Jul 2021
DOIs
Publication statusE-pub ahead of print - 29 Jul 2021

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