Volatility Spillovers in Electricity Markets: Evidence from the United States


  • Themistoclis Pantos Zayed University
  • Stathis Polyzos United Arab Emirates University http://orcid.org/0000-0002-4317-1809
  • Aggelos Armenatzoglou University of the Aegean
  • Ilias Kampouris University of the Aegean


This paper examines the degree of market integration, as observed by measuring volatility spillovers, in selected wholesale electricity spot markets from
United States. We choose markets located at interconnected and non-interconnected areas. We use a Multivariate GARCH framework, which allows
us to model time varying correlations and to conclude whether the markets show evidence of interdependency. We estimate the variance-covariance
and correlation structure, in order to observe the evolution of interactions among markets, accounting for asymmetric effects. We find evidence of
significant correlations between interconnected markets, which are mainly due to electricity transmission, since the observed correlations are above
0.5, but our results show that the desired level of integration has not been accomplished yet. Nevertheless, full integration is not an objective target,
unless new technologies offer a boost towards that direction. Our results suggest that we should move towards a more integrated market, through
legislation reforms and investment in infrastructure, which could increase competition and could lead to capital savings through lower electricity prices.
The unique selection of the markets under examination and the 4-variate BEKK model for electricity markets are special characteristics of this paper.

Keywords: Energy Markets, Electricity Markets, Market Integration, BEKK, Asymmetric Dynamic Conditional Correlation

JEL Claasifications: Q43, Q48, O21, C44

DOI: https://doi.org/10.32479/ijeep.7563


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How to Cite

Pantos, T., Polyzos, S., Armenatzoglou, A., & Kampouris, I. (2019). Volatility Spillovers in Electricity Markets: Evidence from the United States. International Journal of Energy Economics and Policy, 9(4), 131–143. Retrieved from https://www.econjournals.com/index.php/ijeep/article/view/7563