Impact of allowance submissions in European carbon emission markets.pdf (781.66 kB)
Download file

Impact of the Allowance Submissions in European Carbon Emission Markets

Download (781.66 kB)
journal contribution
posted on 06.04.2016, 11:37 by Yukun Shi, D. Philip
This paper studies the impact of the April allowance submissions mandate under the European Union emission trading scheme (EU ETS) in carbon emission markets. Using intraday order flow data, we test for the cross-market efficiency of spot-futures dynamics and find that the equilibrium level, adjustment speed and no-arbitrage boundaries of the spot and futures relationship shift subsequent to the submission date. In addition, our results show that the allowance submissions affect the price discovery process, with the carbon spot market providing stronger price leadership in the periods before the submission date and the futures market playing the predominant informational role thereafter. Using the heterogeneous autoregressive realized volatility (HAR-RV) model, we also find a change in volatility spillovers before the submission date, particularly from the spot to the futures market. Overall, the results suggest that the April allowance submissions have significant impact on the time series dynamics of spot and futures carbon emission markets.

History

Citation

International Review of Financial Analysis, 2015, 40, pp. 27-37

Author affiliation

/Organisation/COLLEGE OF SOCIAL SCIENCES, ARTS AND HUMANITIES/School of Management

Version

AM (Accepted Manuscript)

Published in

International Review of Financial Analysis

Publisher

Elsevier

issn

1057-5219

Acceptance date

13/05/2015

Copyright date

2015

Available date

26/05/2018

Publisher version

http://www.sciencedirect.com/science/article/pii/S1057521915000861

Notes

The file associated with this record is under a 36-month embargo from publication in accordance with the publisher's self-archiving policy. The full text may be available through the publisher links provided above.

Language

en