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Volatility spillovers between the oil market and the European Union carbon emission market

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  • Reboredo, Juan C.

Abstract

This paper examines the dynamics of volatility transmission between EU emission allowances (EUA) and oil markets using a range-based volatility measure. We propose a multivariate conditional autoregressive range model with bivariate lognormal distribution to capture volatility dynamics and volatility spillovers between oil and EUA markets. Our findings for Phase II of the European Union Emissions Trading Scheme point to the existence of volatility dynamics and leverage effects and to no significant volatility spillovers between these markets. These results remained robust to other volatility measures and model specifications.

Suggested Citation

  • Reboredo, Juan C., 2014. "Volatility spillovers between the oil market and the European Union carbon emission market," Economic Modelling, Elsevier, vol. 36(C), pages 229-234.
    • Handle: RePEc:eee:ecmode:v:36:y:2014:i:c:p:229-234
    DOI: 10.1016/j.econmod.2013.09.039
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    References listed on IDEAS

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    More about this item

    Keywords

    CO2 emission allowances; Oil prices; Volatility spillovers; Range volatility;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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