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Asymmetric relationship between carbon emission trading market and stock market: Evidences from China

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  • Wen, Fenghua
  • Zhao, Lili
  • He, Shaoyi
  • Yang, Guozheng

Abstract

This paper has investigated the asymmetric relationship between carbon emission trading market and stock market in China by using the nonlinear auto-regressive distributed lag (NARDL) model. Based on our investigation on both of the overall and sector level of stock market, we have obtained interesting and convincing empirical results that show there are significantly negative long-run and short-run asymmetric relationships between carbon emission trading market and overall stock market in China. Specifically, we have noticed that while passing the effects from the former to the later, the increasing of carbon emission trading price would make greater effects on the stock price than its decreasing. Also, on the sector level, carbon emission trading price is significantly related to some energy intense sectors and financial sector stock market. Furthermore, we have surprisingly found out that there are no significant effects passing from stock index to carbon emission trading price in China, neither on the overall level nor on the sector level of stock market.

Suggested Citation

  • Wen, Fenghua & Zhao, Lili & He, Shaoyi & Yang, Guozheng, 2020. "Asymmetric relationship between carbon emission trading market and stock market: Evidences from China," Energy Economics, Elsevier, vol. 91(C).
    • Handle: RePEc:eee:eneeco:v:91:y:2020:i:c:s0140988320301900
    DOI: 10.1016/j.eneco.2020.104850
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    More about this item

    Keywords

    Carbon emission trading market; China stock market; Asymmetric relationship; NARDL model;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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