Carbon trading thickness and market efficiency
This note tests for the efficient market hypothesis (EMH) in the market for CO2 emission allowances in Phase I and Phase II of the European Union Emissions Trading Scheme (EU ETS). As usually is the case in emerging and non-competitive markets such as the EU ETS, trading often not occurs on a frequent basis. This has adverse implications for both the gains from permit trade as well as biases the EMH tests. Variance ratio tests are employed to adjust for the thin trading effect. The results indicate that Phase I--the trial and learning period--was inefficient, whereas the first period under Phase II shows signs of restoring market efficiency.
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.:
- Kim, Jae H. & Shamsuddin, Abul, 2008. "Are Asian stock markets efficient? Evidence from new multiple variance ratio tests," Journal of Empirical Finance, Elsevier, vol. 15(3), pages 518-532, June.
- Chow, K. Victor & Denning, Karen C., 1993.
"A simple multiple variance ratio test,"
Journal of Econometrics,
Elsevier, vol. 58(3), pages 385-401, August.
- Tom Doan, "undated". "CHOWDENNING: RATS procedure to perform Chow-Denning multiple variance ratio test," Statistical Software Components RTS00035, Boston College Department of Economics.
- Charles, Amélie & Darné, Olivier, 2009. "The efficiency of the crude oil markets: Evidence from variance ratio tests," Energy Policy, Elsevier, vol. 37(11), pages 4267-4272, November.
- Amélie Charles & Olivier Darné, 2009. "The efficiency of the crude oil markets: Evidence from variance ratio tests," Post-Print hal-00771081, HAL.
- Andrew W. Lo, A. Craig MacKinlay, 1988. "Stock Market Prices do not Follow Random Walks: Evidence from a Simple Specification Test," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 41-66.
- Andrew W. Lo & A. Craig MacKinlay, 1987. "Stock Market Prices Do Not Follow Random Walks: Evidence From a Simple Specification Test," NBER Working Papers 2168, National Bureau of Economic Research, Inc.
- Wirl, Franz, 2009. "Oligopoly meets oligopsony: The case of permits," Journal of Environmental Economics and Management, Elsevier, vol. 58(3), pages 329-337, November.
- Seifert, Jan & Uhrig-Homburg, Marliese & Wagner, Michael, 2008. "Dynamic behavior of CO2 spot prices," Journal of Environmental Economics and Management, Elsevier, vol. 56(2), pages 180-194, September.
- Benz, Eva & Trück, Stefan, 2009. "Modeling the price dynamics of CO2 emission allowances," Energy Economics, Elsevier, vol. 31(1), pages 4-15, January.
- Lo, Andrew W. & MacKinlay, A. Craig, 1989. "The size and power of the variance ratio test in finite samples : A Monte Carlo investigation," Journal of Econometrics, Elsevier, vol. 40(2), pages 203-238, February.
- Andrew W. Lo & Craig A. MacKinlay, "undated". "The Size and Power of the Variance Ratio Test in Finite Samples: A Monte Carlo Investigation," Rodney L. White Center for Financial Research Working Papers 28-87, Wharton School Rodney L. White Center for Financial Research.
- Andrew W. Lo & A. Craig MacKinlay, 1988. "The Size and Power of the Variance Ratio Test in Finite Samples: A Monte Carlo Investigation," NBER Technical Working Papers 0066, National Bureau of Economic Research, Inc.
- Hsieh, David A, 1991. " Chaos and Nonlinear Dynamics: Application to Financial Markets," Journal of Finance, American Finance Association, vol. 46(5), pages 1839-1877, December.
- Wright, Jonathan H, 2000. "Alternative Variance-Ratio Tests Using Ranks and Signs," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(1), pages 1-9, January.
- Tom Doan, "undated". "RATS programs to replicate Wright's Alternative Variance Ratio test results," Statistical Software Components RTZ00168, Boston College Department of Economics.
- Choi, In, 1999. "Testing the Random Walk Hypothesis for Real Exchange Rates," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(3), pages 293-308, May-June.
- Hoque, Hafiz A.A.B. & Kim, Jae H. & Pyun, Chong Soo, 2007. "A comparison of variance ratio tests of random walk: A case of Asian emerging stock markets," International Review of Economics & Finance, Elsevier, vol. 16(4), pages 488-502.
- Liski, Matti, 2001. "Thin versus Thick CO2 Market," Journal of Environmental Economics and Management, Elsevier, vol. 41(3), pages 295-311, May.
- 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.
- Kim, Jae H., 2006. "Wild bootstrapping variance ratio tests," Economics Letters, Elsevier, vol. 92(1), pages 38-43, July.
- 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.
- 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.
- Kim, Jae H., 2009. "Automatic variance ratio test under conditional heteroskedasticity," Finance Research Letters, Elsevier, vol. 6(3), pages 179-185, September.
- Deo, Rohit S. & Richardson, Matthew, 2003. "On The Asymptotic Power Of The Variance Ratio Test," Econometric Theory, Cambridge University Press, vol. 19(02), pages 231-239, April.
- Alfons Oude Lansink & Arno van der Vlist, 2008. "Non-Parametric Modelling of CO," Journal of Agricultural Economics, Wiley Blackwell, vol. 59(3), pages 487-497, 09. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:32:y:2010:i:6:p:1331-1336. 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)
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.