Fractal Behavior in Bulgarian Day-Ahead Prices Based on Detrended Fluctuation Analysis

This study investigates the hourly prices of the electricity day-ahead market nonstationary characteristics and long-range correlation. Using the detrended fluctuation analysis (DFA) approach, we show evidence of long memory for the Bulgarian day-ahead market between January 20th, 2016 and December 31, 2019. Furthermore, the results from the DFA methodology shows that behavior of the hourly electricity spot prices returns were long term positively correlated. DFA methods can be used as powerful tools for analyzing very volatile series like electricity prices considering the fact that in recent years prices become more volatile due to increased integration of renewables that are intermittent and far more volatile than other commodities normally considered with extreme volatility. Day ahead electricity prices are crucially important for forecasting, derivatives pricing and risk management and therefore in this paper we give a brief introduction on DFA method.