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Does order flow in the European Carbon Futures Market reveal information?

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  • Kalaitzoglou, Iordanis
  • Ibrahim, Boulis M.
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    Abstract

    This paper identifies the classes of agents at play in the European Carbon Futures Market and analyzes their trading behaviour during the market's early development period. A number of hypotheses related to microstructure are tested using enhanced ACD models. Evidence is presented that the market is characterized by three different groups of traders: informed, fundamental, and uninformed. OTC trades are distinct to regular trades and are used strategically by the informed. Fundamental traders react faster in Phase II and the informed counteract by increasing their trade size and speed. The results indicate enhanced market transparency and increased market maturity.

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    File URL: http://www.sciencedirect.com/science/article/pii/S138641811200050X
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Markets.

    Volume (Year): 16 (2013)
    Issue (Month): 3 ()
    Pages: 604-635

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    Handle: RePEc:eee:finmar:v:16:y:2013:i:3:p:604-635

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    Web page: http://www.elsevier.com/locate/finmar

    Related research

    Keywords: Carbon market; Microstructure; Duration model; Ultra-high-frequency data;

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    References

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    Cited by:
    1. Medina, Vicente & Pardo, Ángel & Pascual, Roberto, 2014. "The timeline of trading frictions in the European carbon market," Energy Economics, Elsevier, vol. 42(C), pages 378-394.

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