IDEAS home Printed from https://ideas.repec.org/a/eee/appene/v92y2012icp51-56.html
   My bibliography  Save this article

Assessing price clustering in European Carbon Markets

Author

Listed:
  • Palao, Fernando
  • Pardo, Angel

Abstract

The presence of price clustering in markets is taken as a sign of market inefficiency that can influence trading strategies. In this paper, we study the presence of a concentration in prices in carbon futures markets. Specifically, we analyze the European Carbon Futures Markets and test for evidence of preference for certain prices above others. Our results reveal the strong presence of price clustering in the carbon market at prices ending in digits 0 and 5. These findings support the attraction hypothesis, which endorses a significant clustering on gravitational prices, but also backs the negotiation hypothesis, which advocates greater clustering when trading costs are higher.

Suggested Citation

  • Palao, Fernando & Pardo, Angel, 2012. "Assessing price clustering in European Carbon Markets," Applied Energy, Elsevier, vol. 92(C), pages 51-56.
  • Handle: RePEc:eee:appene:v:92:y:2012:i:c:p:51-56
    DOI: 10.1016/j.apenergy.2011.10.022
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0306261911006763
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Parkinson, Michael, 1980. "The Extreme Value Method for Estimating the Variance of the Rate of Return," The Journal of Business, University of Chicago Press, vol. 53(1), pages 61-65, January.
    2. Victor Niederhoffer, 1965. "A New Look at Clustering of Stock Prices," The Journal of Business, University of Chicago Press, vol. 39, pages 309-309.
    3. Maria Mansanet-Bataller & Ángel Pardo, 2008. "What You Should Know About Carbon Markets," Energies, MDPI, Open Access Journal, vol. 1(3), pages 1-34, December.
    4. Zhang, Yue-Jun & Wei, Yi-Ming, 2010. "An overview of current research on EU ETS: Evidence from its operating mechanism and economic effect," Applied Energy, Elsevier, vol. 87(6), pages 1804-1814, June.
    5. Christie, William G & Schultz, Paul H, 1994. " Why Do NASDAQ Market Makers Avoid Odd-Eighth Quotes?," Journal of Finance, American Finance Association, vol. 49(5), pages 1813-1840, December.
    6. Brown, Philip & Mitchell, Jason, 2008. "Culture and stock price clustering: Evidence from The Peoples' Republic of China," Pacific-Basin Finance Journal, Elsevier, vol. 16(1-2), pages 95-120, January.
    7. Robert I. Webb & Jason Mitchell, 2001. "Clustering and psychological barriers: the importance of numbers," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 21(5), pages 395-428, May.
    8. Easley, David & O'Hara, Maureen, 1987. "Price, trade size, and information in securities markets," Journal of Financial Economics, Elsevier, vol. 19(1), pages 69-90, September.
    9. Feng, Zhen-Hua & Zou, Le-Le & Wei, Yi-Ming, 2011. "Carbon price volatility: Evidence from EU ETS," Applied Energy, Elsevier, vol. 88(3), pages 590-598, March.
    10. Julio Lucia & Angel Pardo, 2010. "On measuring speculative and hedging activities in futures markets from volume and open interest data," Applied Economics, Taylor & Francis Journals, vol. 42(12), pages 1549-1557.
    11. Adam L. Schwartz & Bonnie F. Van Ness & Robert A. Van Ness, 2004. "Clustering in the futures market: Evidence from S&P 500 futures contracts," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 24(5), pages 413-428, May.
    12. Clifford A. Ball & Walter N. Torous & Adrian E. Tschoegl, 1985. "The degree of price resolution: The case of the gold market," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 5(1), pages 29-43, March.
    13. Harris, Lawrence, 1991. "Stock Price Clustering and Discreteness," Review of Financial Studies, Society for Financial Studies, vol. 4(3), pages 389-415.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:eee:eneeco:v:67:y:2017:i:c:p:213-223 is not listed on IDEAS
    2. Fernando Palao & Ángel Pardo Tornero, 2012. "When size matters: Clustering in the European Carbon Market," Working Papers. Serie EC 2012-10, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    3. Jia, Jun-Jun & Xu, Jin-Hua & Fan, Ying, 2016. "The impact of verified emissions announcements on the European Union emissions trading scheme: A bilaterally modified dummy variable modelling analysis," Applied Energy, Elsevier, vol. 173(C), pages 567-577.
    4. Zhao, Xin-gang & Jiang, Gui-wu & Nie, Dan & Chen, Hao, 2016. "How to improve the market efficiency of carbon trading: A perspective of China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 59(C), pages 1229-1245.
    5. Andreas Karpf & Antoine Mandel & Stefano Battiston, 2017. "Price and Network Dynamics in the European Carbon Market," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01484117, HAL.
    6. Lucia, Julio J. & Mansanet-Bataller, Maria & Pardo, Ángel, 2015. "Speculative and hedging activities in the European carbon market," Energy Policy, Elsevier, vol. 82(C), pages 342-351.
    7. Dowling, Michael & Cummins, Mark & Lucey, Brian M., 2016. "Psychological barriers in oil futures markets," Energy Economics, Elsevier, vol. 53(C), pages 293-304.
    8. Martin T. Bohl, Pierre Siklos, Claudia Wellenreuther, 2018. "Speculative Activity and Returns to Volatility of Chinese Major Agricultural Commodity Futures," LCERPA Working Papers 0111, Laurier Centre for Economic Research and Policy Analysis, revised 30 Jan 2018.
    9. Palao, Fernando & Pardo, Ángel, 2014. "What makes carbon traders cluster their orders?," Energy Economics, Elsevier, vol. 43(C), pages 158-165.
    10. Yanjie Zhu & Les Oxley & Hengyun Ma & Wenchao Wang, 2016. "The emergence of convergent price clusters in China," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 24(1), pages 69-98, January.
    11. Zhou, P. & Zhang, L. & Zhou, D.Q. & Xia, W.J., 2013. "Modeling economic performance of interprovincial CO2 emission reduction quota trading in China," Applied Energy, Elsevier, vol. 112(C), pages 1518-1528.
    12. Abdul-Manan, Amir F.N. & Arfaj, Abdullah & Babiker, Hassan, 2017. "Oil refining in a CO2 constrained world: Effects of carbon pricing on refineries globally," Energy, Elsevier, vol. 121(C), pages 264-275.
    13. Tan, Xue-Ping & Wang, Xin-Yu, 2017. "Dependence changes between the carbon price and its fundamentals: A quantile regression approach," Applied Energy, Elsevier, vol. 190(C), pages 306-325.
    14. Balietti, Anca Claudia, 2016. "Trader types and volatility of emission allowance prices. Evidence from EU ETS Phase I," Energy Policy, Elsevier, vol. 98(C), pages 607-620.
    15. Crossland, Jarrod & Li, Bin & Roca, Eduardo, 2013. "Is the European Union Emissions Trading Scheme (EU ETS) informationally efficient? Evidence from momentum-based trading strategies," Applied Energy, Elsevier, vol. 109(C), pages 10-23.

    More about this item

    Keywords

    Clustering; Price; EUA; ECX;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:appene:v:92:y:2012:i:c:p:51-56. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/405891/description#description .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.