Modelling the dynamics of European carbon futures price: A Zipf analysis
This article investigates the European carbon futures price dynamics by applying the Zipf analysis. The results show that: first, carbon price behaviour is asymmetric, and the long-term bearish probability is greater than the long-term bullish probability. Second, time-scales of investment and speculators' expectations of returns have dual effects on carbon price behaviour. The longer the time-scales of investment, the higher the bearish probability. The lower the expectations of returns, the smaller the distortion of carbon price behaviour. Third, the differences in carbon market cognitions from non-greedy speculators with different expectations of returns mainly lie in the amplitudes and occasions of carbon price fluctuations, rather than in the carbon price fluctuations themselves. Fourth, speculators' expectations of returns have critical points. Once the critical points are reached, they will no longer be able to distort carbon price behaviour. Finally, we discuss some investment advice for supports of the decision-makers. For non-greedy-type speculators, they will choose to hold negatively in the short term and buy and hold in the long term, while for greedy-type speculators they will sell their European Union Allowances (EUAs) in the short term, and buy and hold in the long term. The results are helpful to hedge against unwanted carbon price movements, and to understand the transactions between different types of agents.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
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.:
- Creti, Anna & Jouvet, Pierre-André & Mignon, Valérie, 2012.
"Carbon price drivers: Phase I versus Phase II equilibrium?,"
Elsevier, vol. 34(1), pages 327-334.
- Anna Creti & Pierre-André Jouvet & Valérie Mignon, 2011. "Carbon Price Drivers: Phase I versus Phase II Equilibrium?," Working Papers 1106, Chaire Economie du Climat.
- Anna Creti & Pierre-André Jouvet & Valérie Mignon, 2011. "Carbon Price Drivers: Phase I Versus Phase II Equilibrium?," Working Papers 2011-09, CEPII research center.
- Conrad, Christian & Rittler, Daniel & Rotfuß, Waldemar, 2010.
"Modeling and Explaining the Dynamics of European Union Allowance Prices at High-Frequency,"
0497, University of Heidelberg, Department of Economics.
- Conrad, Christian & Rittler, Daniel & Rotfuß, Waldemar, 2012. "Modeling and explaining the dynamics of European Union Allowance prices at high-frequency," Energy Economics, 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.
- Chevallier, Julien & Ielpo, Florian & Mercier, Ludovic, 2009. "Risk aversion and institutional information disclosure on the European carbon market: A case-study of the 2006 compliance event," Energy Policy, Elsevier, vol. 37(1), pages 15-28, January.
- Xiao, Di & Wang, Jun, 2012. "Modeling stock price dynamics by continuum percolation system and relevant complex systems analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(20), pages 4827-4838.
- Bangzhu Zhu, 2012. "A Novel Multiscale Ensemble Carbon Price Prediction Model Integrating Empirical Mode Decomposition, Genetic Algorithm and Artificial Neural Network," Energies, MDPI, Open Access Journal, vol. 5(2), pages 355, February.
- Chevallier, Julien, 2009. "Carbon futures and macroeconomic risk factors: A view from the EU ETS," Energy Economics, Elsevier, vol. 31(4), pages 614-625, July.
- Alvarez-Ramirez, Jose & Soriano, Angel & Cisneros, Myriam & Suarez, Rodolfo, 2003. "Symmetry/anti-symmetry phase transitions in crude oil markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 322(C), pages 583-596.
- Alexandre Kossoy & Pierre Guigon, . "State and Trends of the Carbon Market 2012," World Bank Other Operational Studies 13336, The World Bank.
- Vandewalle, N. & Ausloos, M., 1999. "The n-Zipf analysis of financial data series and biased data series," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 268(1), pages 240-249.
- Hongli Niu & Jun Wang, 2013. "Power-law scaling behavior analysis of financial time series model by voter interacting dynamic system," Journal of Applied Statistics, Taylor & Francis Journals, vol. 40(10), pages 2188-2203, October.
- Chevallier, Julien, 2011. "Nonparametric modeling of carbon prices," Energy Economics, Elsevier, vol. 33(6), pages 1267-1282.
- Paolella, Marc S. & Taschini, Luca, 2008. "An econometric analysis of emission allowance prices," Journal of Banking & Finance, Elsevier, vol. 32(10), pages 2022-2032, October.
- Maria Mansanet-Bataller & Angel Pardo & Enric Valor, 2007. "CO2 Prices, Energy and Weather," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 73-92.
- Yue-Jun Zhang & Yi-Ming Wei, 2009.
"An overview of current research on EU ETS: Evidence from its operating mechanism and economic effect,"
CEEP-BIT Working Papers
3, Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology.
- 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.
- Zhen-Hua Feng & Le-Le Zou & Yi-Ming Wei, 2009.
"Carbon price volatility: Evidence from EU ETS,"
CEEP-BIT Working Papers
4, Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology.
- repec:dau:papers:123456789/4222 is not listed on IDEAS
- Julien Chevallier, 2010. "Volatility forecasting of carbon prices using factor models," Economics Bulletin, AccessEcon, vol. 30(2), pages 1642-1660.
- repec:dau:papers:123456789/4349 is not listed on IDEAS
- repec:dau:papers:123456789/6791 is not listed on IDEAS
- 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.
- repec:dau:papers:123456789/4221 is not listed on IDEAS
- repec:dau:papers:123456789/4210 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:38:y:2014:i:c:p:372-380. 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: (Shamier, Wendy)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.