IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-02313797.html

Futures trading with information asymmetry and OTC predominance: Another look at the volume/volatility relations in the European carbon markets

Author

Listed:
  • Yves Rannou

    (ESC Clermont-Ferrand - École Supérieure de Commerce (ESC) - Clermont-Ferrand, CRCGM - Centre de Recherche Clermontois en Gestion et Management - UdA - Université d'Auvergne - Clermont-Ferrand I - ESC Clermont-Ferrand - École Supérieure de Commerce (ESC) - Clermont-Ferrand)

  • Pascal Barneto

    (IAE - IAE BORDEAUX - Université Montesquieu - Bordeaux 4, IRGO - Institut de Recherche en Gestion des Organisations - UB - Université de Bordeaux - Institut d'Administration des Entreprises (IAE) - Bordeaux)

Abstract

This paper constitutes the first exercise of analysing the European carbon market efficiency from a double perspective combining both nature of execution venues (screen vs. OTC trading) and their volatility/liquidity relations. Using a bivariate asymmetric GJR-GARCH model, we first document that OTC (exchange traded) trading volume shows consistent bi-(uni) directional Granger causality to our volatility estimates, consistent with greater responsiveness of the OTC (exchange traded) market to changes in market-wide (idiosyncratic) risks. Second, we report significant contemporaneous and lagged positive causality of OTC derivatives volume on spot/futures volatility confirming that the Sequential Information Arrival Hypothesis (SIAH) applies. Third, we find that the one-way causality from OTC to futures volumes is mainly driven by heterogeneous investor beliefs: trading volume provides an indication on how (private) information is dispersed and held at different levels rather than proxying information signal itself. After rejecting execution venues' substitutability, we advocate for systematic clearing and netting of OTC positions through a unique clearing house and reporting rules to identify speculation in line with Mifid (Art. 59) proposals.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Yves Rannou & Pascal Barneto, 2016. "Futures trading with information asymmetry and OTC predominance: Another look at the volume/volatility relations in the European carbon markets," Post-Print hal-02313797, HAL.
    • Handle: RePEc:hal:journl:hal-02313797
    DOI: 10.1016/j.eneco.2014.10.010
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a
    for a similarly titled item that would be available.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sattarhoff, Cristina & Gronwald, Marc, 2022. "Measuring informational efficiency of the European carbon market — A quantitative evaluation of higher order dependence," International Review of Financial Analysis, Elsevier, vol. 84(C).
    2. Federico Galán-Valdivieso & Elena Villar-Rubio & María-Dolores Huete-Morales, 2018. "The erratic behaviour of the EU ETS on the path towards consolidation and price stability," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 18(5), pages 689-706, October.
    3. Iordanis Angelos Kalaitzoglou, 2025. "Cleaning the carbon market! Market transparency and market efficiency in the EU ETS," Annals of Operations Research, Springer, vol. 347(1), pages 501-533, April.
    4. Al Aali-Bujari & Francisco Venegas-Mart nez & Roberto J. Santill n-Salgado, 2018. "On the Stock Market-Electricity Sector Nexus in Latin America: A Dynamic Panel Data Model," International Journal of Energy Economics and Policy, Econjournals, vol. 8(6), pages 148-154.
    5. Yang, Lu & Hamori, Shigeyuki, 2021. "The role of the carbon market in relation to the cryptocurrency market: Only diversification or more?," International Review of Financial Analysis, Elsevier, vol. 77(C).
    6. Huawei Niu & Tianyu Liu, 2024. "Forecasting the volatility of European Union allowance futures with macroeconomic variables using the GJR-GARCH-MIDAS model," Empirical Economics, Springer, vol. 67(1), pages 75-96, July.
    7. Zhongju Liao & Ke Chen, 2025. "What Drives Market‐Oriented Trading of Resource and Environmental Elements: An Analysis Based on the Technology–Organization–Environment Framework," Sustainable Development, John Wiley & Sons, Ltd., vol. 33(4), pages 5998-6012, August.
    8. Fan, John Hua & Todorova, Neda, 2017. "Dynamics of China’s carbon prices in the pilot trading phase," Applied Energy, Elsevier, vol. 208(C), pages 1452-1467.
    9. Chang, Kai & Chen, Rongda & Chevallier, Julien, 2018. "Market fragmentation, liquidity measures and improvement perspectives from China's emissions trading scheme pilots," Energy Economics, Elsevier, vol. 75(C), pages 249-260.
    10. Alizadeh, Amir H. & Tamvakis, Michael, 2016. "Market conditions, trader types and price–volume relation in energy futures markets," Energy Economics, Elsevier, vol. 56(C), pages 134-149.
    11. Rannou, Yves & Boutabba, Mohamed Amine & Barneto, Pascal, 2021. "Are Green Bond and Carbon Markets in Europe complements or substitutes? Insights from the activity of power firms," Energy Economics, Elsevier, vol. 104(C).
    12. Yensen Ni, 2024. "Navigating Energy and Financial Markets: A Review of Technical Analysis Used and Further Investigation from Various Perspectives," Energies, MDPI, vol. 17(12), pages 1-22, June.
    13. Wang, Ge & Zhang, Qi & Su, Bin & Shen, Bo & Li, Yan & Li, Zhengjun, 2021. "Coordination of tradable carbon emission permits market and renewable electricity certificates market in China," Energy Economics, Elsevier, vol. 93(C).
    14. Fang, Guochang & Tian, Lixin & Liu, Menghe & Fu, Min & Sun, Mei, 2018. "How to optimize the development of carbon trading in China—Enlightenment from evolution rules of the EU carbon price," Applied Energy, Elsevier, vol. 211(C), pages 1039-1049.
    15. Hui Hong & Shitong Wu & Cheng Zhang, 2025. "Margin buying activity and stock market trading in China: Is there a connection?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 30(2), pages 1564-1582, April.
    16. Xingang Zhao & Yuzhuo Zhang & Ji Liang & Yanbin Li & Rongda Jia & Ling Wang, 2018. "The Sustainable Development of the Economic-Energy-Environment (3E) System under the Carbon Trading (CT) Mechanism: A Chinese Case," Sustainability, MDPI, vol. 10(1), pages 1-21, January.
    17. Zhou, Liyun & Zhang, Rixin & Huang, Jialiang, 2019. "Investor trading behavior on agricultural future prices," The North American Journal of Economics and Finance, Elsevier, vol. 47(C), pages 365-379.
    18. Yves Rannou & Pascal Barneto & Mohamed Amine Boutabba, 2020. "Green Bond market vs. Carbon market in Europe : Two different trajectories but some complementarities," Working Papers hal-02981422, HAL.
    19. Phan, Hoàng-Long & Zurbruegg, Ralf & Brockman, Paul & Yu, Chia-Feng (Jeffrey), 2022. "Time-to-maturity and commodity futures return volatility: The role of time-varying asymmetric information," Journal of Commodity Markets, Elsevier, vol. 26(C).
    20. Tan, Xue-Ping & Wang, Xin-Yu, 2017. "Dependence changes between the carbon price and its fundamentals: A quantile regression approach," Applied Energy, Elsevier, vol. 190(C), pages 306-325.

    More about this item

    JEL classification:

    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G19 - Financial Economics - - General Financial Markets - - - Other

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-02313797. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.