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

doi:10.1007/s10479-021-04211-z

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 journal › Article › peer-review

6 Citations (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 language	English
Pages (from-to)	191-229
Number of pages	39
Journal	Annals of Operations Research
Volume	313
Issue number	1
Early online date	29 Jul 2021
DOIs	https://doi.org/10.1007/s10479-021-04211-z
Publication status	Published - 1 Jun 2022

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

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.",

keywords = "Renewables, Decarbonization, Iberian countries, Energy demand, Energy prices, Stochastic HMM, Copulas, Bootstrapped VAR models",

author = "Jorge Antunes and Gil-Alana, {Luis Alberiko} and Rossana Riccardi and Aaron Tan and Peter Wanke",

note = "Funding Information: Comments from the Editor and two anonymous reviewers are gratefully acknowledged. Publisher Copyright: {\textcopyright} 2021, The Author(s).",

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doi = "10.1007/s10479-021-04211-z",

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T1 - Unveiling endogeneity and temporal dependence in energy prices and demand in Iberian countries

T2 - a stochastic hidden Markov model approach

AU - Antunes, Jorge

AU - Gil-Alana, Luis Alberiko

AU - Riccardi, Rossana

AU - Tan, Aaron

AU - Wanke, Peter

PY - 2022/6/1

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N2 - 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.

AB - 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.

KW - Renewables

KW - Decarbonization

KW - Iberian countries

KW - Energy demand

KW - Energy prices

KW - Stochastic HMM

KW - Copulas

KW - Bootstrapped VAR models

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JF - Annals of Operations Research

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

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