Multiscale Fractal Analysis of Electricity Markets

Abstract

The fractal characteristic of the electricity market has attracted significant research attention in recent years. And the heterogeneous microstructure analysis of the fractal behaviors represent a natural step forward to the understanding and modeling of the complex electricity price behaviors. In this paper, we introduce the Empirical Mode Decomposition (EMD) to analyze the heterogeneous microstructure underlying the electricity market. The Multifractal Detrended Fluctuation Analysis method (MFDFA) is used to analyze the fractal characteristics in the EMD decomposed domain. Empirical studies have been conducted in four electricity markets in Australia. Results show that the market consists of heterogeneous underlying Data Generating Process (DGP) that exhibits significant fractal characteristics.