IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Modeling the dynamics of European carbon futures price: a Zipf analysis

  • Bangzhu Zhu
  • Shujiao Ma
  • Julien Chevallier
  • Yiming Wei

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 time-scales of investment, the higher the bearish probability. The lower 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 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.

File URL: http://www.ipag.fr/wp-content/uploads/recherche/WP/IPAG_WP_2014_155.pdf
Download Restriction: no

Paper provided by Department of Research, Ipag Business School in its series Working Papers with number 2014-155.

as
in new window

Length: 19 pages
Date of creation: 25 Feb 2014
Date of revision:
Handle: RePEc:ipg:wpaper:2014-155
Contact details of provider: Postal: 184 Boulevard Saint-Germain, 75006 Paris
Phone: 33 1 53 63 36 00
Web page: http://www.ipag.fr

More information through EDIRC

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.:

as in new window
  1. 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.
  2. Creti, Anna & Jouvet, Pierre-André & Mignon, Valérie, 2012. "Carbon price drivers: Phase I versus Phase II equilibrium?," Energy Economics, Elsevier, vol. 34(1), pages 327-334.
  3. repec:wbk:wboper:13336 is not listed on IDEAS
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. Chevallier, Julien, 2011. "Nonparametric modeling of carbon prices," Energy Economics, Elsevier, vol. 33(6), pages 1267-1282.
  9. 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.
  10. 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.
  11. 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.
  12. 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.
  13. 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 355-370, February.
  14. 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.
  15. Chevallier, Julien, 2010. "Volatility forecasting of carbon prices using factor models," Economics Papers from University Paris Dauphine 123456789/4349, Paris Dauphine University.
  16. 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.
  17. 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.
  18. Alberola, Emilie & Chevallier, Julien & Chèze, Benoît, 2008. "Price drivers and structural breaks in European carbon prices 2005-07," Economics Papers from University Paris Dauphine 123456789/4222, Paris Dauphine University.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ipg:wpaper:2014-155. 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: (Ingmar Schumacher)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.