Price Discovery, Causality and Volatility Spillovers in European Union Allowances Phase II: A High Frequency Analysis
AbstractThis paper deals with the modeling of the relationship of European Union Allowance spot- and futures-prices within the second commitment period of the European Union Emission Trading Scheme. Based on high frequency data, we analyze causality in the first and the second conditional moments. To reveal long run price discovery we compute the common factor weights proposed by Schwarz and Szakmary (1994) and the information share proposed by Hasbrouck (1995) based on the estimated coefficients of a vector error correction model. To analyze the short run dynamics we perform Granger causalty tests. The GARCH-BEKK model introduced by Engle and Kroner (1995) is employed to analyze the volatility transmission structure. We identify the futures market to be the leader of the long run price discovery process whereas a bidirectional short run causality structure is observed. Furthermore we detect unidirectional volatility transmission from the futures to the spot market at highest frequencies.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Heidelberg, Department of Economics in its series Working Papers with number 0492.
Date of creation: 25 Nov 2009
Date of revision:
Note: This paper is part of http://archiv.ub.uni-heidelberg.de/volltextserver/view/schriftenreihen/sr-3.html
Contact details of provider:
Postal: Grabengasse 14, D-69117 Heidelberg
Phone: +49-6221-54 2905
Fax: +49-6221-54 2914
Web page: http://www.awi.uni-heidelberg.de/
More information through EDIRC
CO2 Emission Allowances; Causality; Volatility Transmission; Spot Prices; Futures Prices;
Find related papers by JEL classification:
- CO2 - Mathematical and Quantitative Methods - - - - -
- Emi - Macroeconomics and Monetary Economics - - - - -
- All - General Economics and Teaching - - - - -
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-12-05 (All new papers)
- NEP-EEC-2009-12-05 (European Economics)
- NEP-ENE-2009-12-05 (Energy Economics)
- NEP-ENV-2009-12-05 (Environmental Economics)
- NEP-MST-2009-12-05 (Market Microstructure)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Theissen, Erik, 2002.
"Price discovery in floor and screen trading systems,"
Journal of Empirical Finance,
Elsevier, vol. 9(4), pages 455-474, November.
- Erik Theissen, 2001. "Price Discovery in Floor and Screen Trading Systems," Bonn Econ Discussion Papers bgse35_2001, University of Bonn, Germany.
- Tim Bollerslev, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
EERI Research Paper Series
EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
- Oberndorfer, Ulrich & Rennings, Klaus, 2006. "The Impact of the European Union Emissions Trading Scheme on Competitiveness in Europe," ZEW Discussion Papers 06-51, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Julien Chevallier & Emilie Alberola, 2009.
"Banking and Borrowing in the EU ETS: An Econometric Appraisal of the 2005-2007 Intertemporal Market,"
- Alberola, Emilie & Chevallier, Julien, 2009. "Banking and Borrowing in the EU ETS: An Econometric Appraisal of the 2005-2007 Intertemporal Market," Economics Papers from University Paris Dauphine 123456789/4599, Paris Dauphine University.
- Julien Chevallier & Benoît Sévi, 2009.
"On the realized volatility of the ECX CO2 emissions 2008 futures contract: distribution, dynamics and forecasting,"
- Sévi, Benoît & Chevallier, Julien, 2011. "On the realized volatility of the ECX CO2 emissions 2008 futures contract: distribution, dynamics and forecasting," Economics Papers from University Paris Dauphine 123456789/4598, Paris Dauphine University.
- Julien Chevallier & Benoît Sévi, 2009. "On the Realized Volatility of the ECX CO2 Emissions 2008 Futures Contract: Distribution, Dynamics and Forecasting," Working Papers 2009.113, Fondazione Eni Enrico Mattei.
- Julien Chevallier & Benoît Sévi, 2009. "On the realized volatility of the ECX CO2 emissions 2008 futures contract: distribution, dynamics and forecasting," EconomiX Working Papers 2009-24, University of Paris West - Nanterre la Défense, EconomiX.
- Emilie Alberola & Julien Chevallier, 2009.
"European Carbon Prices and Banking Restrictions: Evidence from Phase I (2005-2007),"
The Energy Journal,
International Association for Energy Economics, vol. 0(Number 3), pages 51-80.
- Emilie Alberola & Julien Pierre Chevallier, 2007. "European carbon prices and banking restrictions: evidence from phase I (2005-2007)," EconomiX Working Papers 2007-32, University of Paris West - Nanterre la Défense, EconomiX.
- Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
- Bollerslev, Tim & Engle, Robert F & Wooldridge, Jeffrey M, 1988. "A Capital Asset Pricing Model with Time-Varying Covariances," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 116-31, February.
- Peter Cramton & Suzi Kerr, 2002.
"Tradeable Carbon Permit Auctions: How and Why to Auction Not Grandfather,"
Papers of Peter Cramton
02eptc, University of Maryland, Department of Economics - Peter Cramton, revised 06 May 2002.
- Cramton, Peter & Kerr, Suzi, 2002. "Tradeable carbon permit auctions: How and why to auction not grandfather," Energy Policy, Elsevier, vol. 30(4), pages 333-345, March.
- Kerr, Suzi & Cramton, Peter, 1998. "Tradable Carbon Permit Auctions: How and Why to Auction Not Grandfather," Discussion Papers dp-98-34, Resources For the Future.
- Conrad, Christian & Rittler, Daniel & Rotfuß, Waldemar, 2012.
"Modeling and explaining the dynamics of European Union Allowance prices at high-frequency,"
Elsevier, vol. 34(1), pages 316-326.
- Conrad, Christian & Rittler, Daniel & Rotfuß, Waldemar, 2010. "Modeling and explaining the dynamics of European Union allowance prices at high-frequency," ZEW Discussion Papers 10-038, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Conrad, Christian & Rittler, Daniel & Rotfuß, Waldemar, 2010. "Modeling and Explaining the Dynamics of European Union Allowance Prices at High-Frequency," Working Papers 0497, University of Heidelberg, Department of Economics.
- Daskalakis, George & Psychoyios, Dimitris & Markellos, Raphael N., 2009. "Modeling CO2 emission allowance prices and derivatives: Evidence from the European trading scheme," Journal of Banking & Finance, Elsevier, vol. 33(7), pages 1230-1241, July.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
- Alberola, Emilie & Chevallier, Julien & Cheze, Benoi^t, 2008. "Price drivers and structural breaks in European carbon prices 2005-2007," Energy Policy, Elsevier, vol. 36(2), pages 787-797, February.
- Emilie Alberola & Benoît Chèze & Julien Chevallier, 2008. "The EU Emissions Trading Scheme : Disentangling the Effects of Industrial Production and CO2 Emissions on Carbon Prices," EconomiX Working Papers 2008-12, University of Paris West - Nanterre la Défense, EconomiX.
- Benz, Eva & Trück, Stefan, 2009. "Modeling the price dynamics of CO2 emission allowances," Energy Economics, Elsevier, vol. 31(1), pages 4-15, January.
- Alberola, Emilie & Chevallier, Julien & Chèze, Benoît, 2008. "Price drivers and structural breaks in European carbon prices 2005-07," Economics Papers from University Paris Dauphine 123456789/4222, Paris Dauphine University.
- Engle, Robert F. & Kroner, Kenneth F., 1995. "Multivariate Simultaneous Generalized ARCH," Econometric Theory, Cambridge University Press, vol. 11(01), pages 122-150, February.
- Szymon Borak & Wolfgang Härdle & Stefan Trück & Rafal Weron, 2006. "Convenience Yields for CO2 Emission Allowance Futures Contracts," SFB 649 Discussion Papers SFB649DP2006-076, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
- Löschel, Andreas & Lange, Andreas & Hoffmann, Tim & Böhringer, Christoph & Moslener, Ulf, 2004. "Assessing Emission Allocation in Europe: An Interactive Simulation Approach," ZEW Discussion Papers 04-40, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gabi Rauscher).
If references are entirely missing, you can add them using this form.