A Robust Multivariate Long Run Analysis of European Electricity Prices

Matteo M. Pelagatti, University of Milan - Bicocca
Bruno Bosco, Università degli Studi di Milano-Bicocca
Lucia Parisio, Università degli Studi di Milano-Bicocca
Fabio Baldi, Università degli Studi di Milano-Bicocca and Ref. Ricerche per l’economia e la finanza

Abstract

This paper analyses the interdependencies existing in wholesale European electricity prices. The results of a multivariate long run dynamic analysis of weekly median prices reveal the presence of a strong although not perfect integration among some neighboring markets considered in the sample and the existence of common long-term dynamics of electricity prices and gas prices but not oil prices. The existence of long-term dynamics among gas prices and electricity prices may prove to be important for long-term hedging operations to be conducted even in markets where there are no electricity derivatives.