European Financial and Accounting Journal 2019, 14(3):25-44 | DOI: 10.18267/j.efaj.232

Time Evolution of Hurst Exponent: Czech Wholesale Electricity Market Study

Juraj Čurpek1
1 University of Economics, Prague, Faculty of Finance and Accounting, Department of Banking and Insurance, W. Churchill Sq. 4, 130 67 Prague 3, Czech Republic


In this paper we analyse a temporal evolution of the Hurst exponent estimated on hourly returns of intraday electricity prices in the Czech Republic in 2017 and 2018. Firstly we used the log-returns with adjustments due to negative values, and secondly we employed the returns based on the area hyperbolic sine transformation. We implemented a sliding window technique in order to estimate the Hurst exponent using the Detrended Fluctuation Analysis method on subsamples with four distinct window sizes. According to the stylised facts of electricity, the spot prices and their corresponding logarithmic returns should be mean-reverting. Since the Czech intraday electricity market remains mostly unexplored, we examined this phenomenon on the intraday rather than on the spot market. Consequently, our analysis showed that the estimated values of Hurst exponent indicate a mean-reverting process for time scales greater than 24 hours and a weakly mean-reverting process for the shorter time scales. There were a few exceptions, though, since our calculations have revealed the presence of a nearly random or even weakly persistent behaviour on the shorter time scales.

Keywords: Hurst exponent; Detrended Fluctuation Analysis; electricity markets; intraday market.
JEL classification: C13, G10

Accepted: February 10, 2020; Published: December 31, 2019  Show citation

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Čurpek, J. (2019). Time Evolution of Hurst Exponent: Czech Wholesale Electricity Market Study. European Financial and Accounting Journal, 14(3), 25-44. doi: 10.18267/j.efaj.232
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