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Home bias and herding in carbon market trading

Author

Listed:
  • Liu, Jia
  • Lee, Yen-Hsien
  • Li, Ben-Ang
  • Yang, J. Jimmy

Abstract

This study examines the impact of local and global carbon markets on the returns of companies under China's National Emissions Trading Scheme. The empirical findings show that both markets positively affect the returns of China's carbon-neutral concept stocks, with a stronger impact from the local market after implementing the Scheme. This evidence supports the home bias theory and herding effect, indicating that domestic frameworks significantly influence market dynamics and investor behavior. The findings suggest that national carbon markets provide economic and environmental advantages and enhance investment attractiveness.

Suggested Citation

  • Liu, Jia & Lee, Yen-Hsien & Li, Ben-Ang & Yang, J. Jimmy, 2025. "Home bias and herding in carbon market trading," Finance Research Letters, Elsevier, vol. 78(C).
    • Handle: RePEc:eee:finlet:v:78:y:2025:i:c:s1544612325003629
    DOI: 10.1016/j.frl.2025.107099
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