Garch Modelling of High-Frequency Volatility in Australia's National Electricity Market (original) (raw)

2000, SSRN Electronic Journal

This paper considers the underlying volatility process in Australian electricity prices and examines the applicability of a range of GARCH specifications to modelling volatility in 5 regional pool markets in the NEM. The GARCH variants considered include the basic GARCH, TARCH, EGARCH and PARCH specifications. The approach used in this study differs from the previous Australian ARCH-based studies in that discrete half-hourly returns are used over a six-year sample period, across each of five regional pools in the NEM. Seasonal effects and outliers (price spikes) are filtered prior to fitting the various GARCH models in order to investigate the underlying volatility process without the noise contributed by these effects. Results show that the PARCH specification is favoured in the NSW, QLD and SNOWY regions but in QLD and SA, the EGARCH specification is preferred as it more reliably describes the volatility processes in those two regions.