MODELLING PRICE DYNAMICS IN TURKISH ELECTRICITY MARKET: LESSONS FROM GARCH ESTIMATES

In this paper, we estimate electricity market volatility in Turkey using various GARCH-class models. Spot  price in Turkish electricity market exhibits significant variation and therefore, conditional modelling of  the volatility can make us better understand the price dynamics of this important market. We estimate  volatilities of weekly prices over the period of January 2010 to April 2017 and compare the performance  of various GARCH models that take into account the asymmetric effects, possible mean effects of the  volatility, fat-tails of the distribution and persistence of the volatility series. We found time varying  volatility is an important feature of the price dynamics in Turkish electricity market and additionally, in  modelling volatility, paying attention to the extreme price changes via heavy tailed distributions improves  the model fit substantially.