Forecastng Day-Ahead Electricity Prices of Singapore through ARIMA and Wavelet-ARIMA Kristne Joy E. Carpio Department of Mathematcs, De La Salle University, Manila, Philippines carpiok@dlsu.edu.ph Anne Marie L. Go Bank of Singapore Limited, 22/F Tower One and Exchange Plaza Ayala Triangle, Ayala Avenue, Makat City, Philippines anne.go.marie@gmail.com Camille Krisca M. Roncal Insttutonal Shareholder Services, Inc., 15th Floor Solaris One Building 130 Dela Rosa Street, 1229 Makat City, Philippines ckmroncal13@yahoo.com DLSU Business & Economics Review 22.1 (2012), pp. 97-118 Copyright © 2012 De La Salle University, Philippines The changes observed in the electricity markets over the past decade brought about developments in the feld of electricity modeling. In this paper, traditional AutoRegressive Integrated Moving Average (ARIMA) models and Wavelet-ARIMA models are applied to the Singapore electricity market, Asia’s frst liberalized electricity market. Forecasting will be done for each electricity price modelling technique and the adequacy of the models is tested through forecast accuracy. The comparison of forecast accuracy of the models is done across different data behaviors. Keywords: ARIMA, Wavelet-ARIMA, electricity market, forecasting INTRODUCTION Electricity has been one of the fastest growing energy commodities since the beginning of the industrial revolution. The fast-paced growth of electricity dependent industries and its eventual incorporation to households brought about rapid changes in different energy policies, specifcally in electricity deregulation and competition (Ventosa, Baíllo, Ramos, & Rivier, 2005). In most electricity markets around the world, private frms have gained majority of the industry control in contrast to the centralized and government controlled markets before. The surge of private companies in the industry led to a more elastic electricity supply, with all frms striving to provide electricity in the price dictated by the market (Ventosa et al., 2005, p. 897). Most electricity markets have been deregulated in the past decade (Weber, 2005). The rigid centralization from previous markets evolved towards an electricity market that seemed to be wholesale in nature. The shift from regulated to deregulated markets was done to