A GARCH analysis of the determinants of increased volatility of returns in the European energy utilities sector since liberalisation

Tulloch, D.J., Diaz-Rainey, I. and Moffatt, P. (2012) A GARCH analysis of the determinants of increased volatility of returns in the European energy utilities sector since liberalisation. In: 9th International Conference on the European Energy Market, EEM 12. UNSPECIFIED. ISBN 9781467308328

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Abstract

This paper used panel regression and GARCH analysis to investigate changes in volatility of total returns of European energy companies due to energy sector liberalisation events. The paper constructed an index of 24 energy companies and calculated a 22 days rolling standard deviation of daily total returns over a 21 year period. Eight liberalisation events were identified. An unbalanced random-effects panel regression was used to analyse liberalisation's impact on the standard deviation. A GARCH (Generalised Autoregressive Conditional Heterosce-dasticity) analysis was used on the constructed index to measure volatility clustering and conditional variance. The panel regression showed that overall volatility has increased, however some liberalisation events decreased volatility. The GARCH analysis demonstrated that returns increased over the time period and found high autocorrelation, but no conditional variance using a 1 day lag. Our analyses show that both risk and return have increased during liberalisation with the largest increases in volatility and return occurring when businesses and households could freely choose suppliers.

Item Type: Book Section
Faculty \ School: Faculty of Social Sciences > Norwich Business School
Faculty of Social Sciences > School of Economics
Related URLs:
Depositing User: Pure Connector
Date Deposited: 14 Nov 2013 14:00
Last Modified: 22 Apr 2020 10:39
URI: https://ueaeprints.uea.ac.uk/id/eprint/44449
DOI: 10.1109/EEM.2012.6254799

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