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Testing the Martingale Difference Hypothesis in the EU ETS Markets for the CO2 Emission Allowances: Evidence from Phase I and Phase II

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Author Info

  • Amélie Charles

    (Audencia Nantes, School of Management - Audencia, School of Management)

  • Olivier Darné

    (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272)

  • Jessica Fouilloux

    (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes I - Université de Caen)

Abstract

This study examines the martingale difference hypothesis (MDH) for the market of carbon emission allowances within the European Union Emission Trading Scheme (EU ETS) during the Phase I and the Phase II, using both daily and weekly data over the period 2005--2009. The weak-form efficient market hypothesis for spot prices negotiated on BlueNext, European Energy Exchange and NordPool is tested with new variance ratio tests developed by Kim (2009). For the Phase I, the results show that these three markets of the European Union allowances seems to be efficiency, except after the European Commission announcements of stricter Phase II allocation in October 2006. Finally, we find that the CO2 spot prices seem to be weak-form efficiency during the Phase II since the MDH is failed to reject from both daily and weekly data.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number hal-00473727.

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Date of creation: 2010
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Handle: RePEc:hal:wpaper:hal-00473727

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Cited by:
  1. Ciumas Cristina & Chis Diana-Maria & Botos Horia Mircea, 2012. "Global Financial Crisis And Unit-Linked Insurance Markets Efficiency: Empirical Evidence From Central And Eastern European Countries," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 443-448, December.

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