Testing the Efficiency of Electricity Markets Using a New Composite Measure Based on Nonlinear TS Tools
In this paper we examine and compare the efficiency of four European electricity markets (NordPool, Italian, Spanish and Greek) of different microstructure and level of maturity, by testing the weak form of the Efficient Market Hypothesis (EMH). To quantify the level of efficiency deviation of each...
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| Format: | Article |
| Language: | English |
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MDPI AG
2019-02-01
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| Series: | Energies |
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| Online Access: | https://www.mdpi.com/1996-1073/12/4/618 |
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| author | George P. Papaioannou Christos Dikaiakos Akylas C. Stratigakos Panos C. Papageorgiou Konstantinos F. Krommydas |
| author_facet | George P. Papaioannou Christos Dikaiakos Akylas C. Stratigakos Panos C. Papageorgiou Konstantinos F. Krommydas |
| author_sort | George P. Papaioannou |
| collection | DOAJ |
| description | In this paper we examine and compare the efficiency of four European electricity markets (NordPool, Italian, Spanish and Greek) of different microstructure and level of maturity, by testing the weak form of the Efficient Market Hypothesis (EMH). To quantify the level of efficiency deviation of each market from the ‘ideal’ or ‘benchmark market of random walk’, we have constructed a Composite Electricity Market Efficiency Index (EMEI), inspired by similar works on other energy commodities. The proposed index consists of linear and nonlinear components each one measuring a different feature or dimension of the market efficiency such as its complexity, fractality, entropy, long-term memory or correlation, all connected to the associated benchmark values of the Random Walk Process (RWP). The key findings are that overall, all examined electricity markets are inefficient in respect to the weak form of EMH and the less inefficient market, as measured by the EMEI is the NordPool, closely followed by the Spanish market, with the Italian being the third. The most inefficient market is the Greek one. These results are in accordance with the predominant view about the maturity of these markets. This study contributes significantly on improving the research framework in developing consistent and robust tools for efficiency measurement, while the proposed index can be a valuable tool in designing improved guidelines towards enhancing the efficiency of electricity markets. |
| first_indexed | 2024-04-14T00:47:30Z |
| format | Article |
| id | doaj.art-efff7eea19554731b8195d67819d4e9e |
| institution | Directory Open Access Journal |
| issn | 1996-1073 |
| language | English |
| last_indexed | 2024-04-14T00:47:30Z |
| publishDate | 2019-02-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Energies |
| spelling | doaj.art-efff7eea19554731b8195d67819d4e9e2022-12-22T02:21:59ZengMDPI AGEnergies1996-10732019-02-0112461810.3390/en12040618en12040618Testing the Efficiency of Electricity Markets Using a New Composite Measure Based on Nonlinear TS ToolsGeorge P. Papaioannou0Christos Dikaiakos1Akylas C. Stratigakos2Panos C. Papageorgiou3Konstantinos F. Krommydas4Research, Technology & Development Department, Independent Power Transmission Operator (IPTO) S.A., 89 Dyrrachiou & Kifisou Str. Gr, 104 43 Athens, GreeceResearch, Technology & Development Department, Independent Power Transmission Operator (IPTO) S.A., 89 Dyrrachiou & Kifisou Str. Gr, 104 43 Athens, GreeceDepartment of Electrical and Computer Engineering, University of Patras, 26 500 Patras, GreeceDepartment of Electrical and Computer Engineering, University of Patras, 26 500 Patras, GreeceDepartment of Electrical and Computer Engineering, University of Patras, 26 500 Patras, GreeceIn this paper we examine and compare the efficiency of four European electricity markets (NordPool, Italian, Spanish and Greek) of different microstructure and level of maturity, by testing the weak form of the Efficient Market Hypothesis (EMH). To quantify the level of efficiency deviation of each market from the ‘ideal’ or ‘benchmark market of random walk’, we have constructed a Composite Electricity Market Efficiency Index (EMEI), inspired by similar works on other energy commodities. The proposed index consists of linear and nonlinear components each one measuring a different feature or dimension of the market efficiency such as its complexity, fractality, entropy, long-term memory or correlation, all connected to the associated benchmark values of the Random Walk Process (RWP). The key findings are that overall, all examined electricity markets are inefficient in respect to the weak form of EMH and the less inefficient market, as measured by the EMEI is the NordPool, closely followed by the Spanish market, with the Italian being the third. The most inefficient market is the Greek one. These results are in accordance with the predominant view about the maturity of these markets. This study contributes significantly on improving the research framework in developing consistent and robust tools for efficiency measurement, while the proposed index can be a valuable tool in designing improved guidelines towards enhancing the efficiency of electricity markets.https://www.mdpi.com/1996-1073/12/4/618electricity marketefficiencyEMHcomplexityHurst exponententropycomposite index |
| spellingShingle | George P. Papaioannou Christos Dikaiakos Akylas C. Stratigakos Panos C. Papageorgiou Konstantinos F. Krommydas Testing the Efficiency of Electricity Markets Using a New Composite Measure Based on Nonlinear TS Tools Energies electricity market efficiency EMH complexity Hurst exponent entropy composite index |
| title | Testing the Efficiency of Electricity Markets Using a New Composite Measure Based on Nonlinear TS Tools |
| title_full | Testing the Efficiency of Electricity Markets Using a New Composite Measure Based on Nonlinear TS Tools |
| title_fullStr | Testing the Efficiency of Electricity Markets Using a New Composite Measure Based on Nonlinear TS Tools |
| title_full_unstemmed | Testing the Efficiency of Electricity Markets Using a New Composite Measure Based on Nonlinear TS Tools |
| title_short | Testing the Efficiency of Electricity Markets Using a New Composite Measure Based on Nonlinear TS Tools |
| title_sort | testing the efficiency of electricity markets using a new composite measure based on nonlinear ts tools |
| topic | electricity market efficiency EMH complexity Hurst exponent entropy composite index |
| url | https://www.mdpi.com/1996-1073/12/4/618 |
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