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A Microstructure Analysis of the Carbon Finance Market

Bredin, D., Hyde, S.J., Muckley, C

International Review of Financial Analysis. 2014;34:222-234.

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Abstract

The European Union Emissions Trading Scheme is the key policy instrument of the European Commission’s Climate Change Program aimed at reducing greenhouse gas emissions to eight percent below 1990 levels by 2012. The key asset traded under the scheme is the European Union allowance (EUA). This article examines ultra high frequency data to assess the extent of the development in the futures market of the EU Emissions Trading Scheme. Our results indicate significant developments consistent with sequential information arrival. They also indicate a negative contemporaneous relationship between volume and volatility for all contracts. The implication is that liquidity traders dominate any role played by informed traders. Incorporating the duration between trades in our analysis has significant impact suggesting that any empirical investigation of the intra-day volume-volatility relationship needs to actively account for the impact of time elapse between trades.

Keyword(s)

CO2 emissions allowances Futures Emissions trading Energy Kyoto Protocol Market microstructure

Bibliographic metadata

Type of resource:
Content type:
Publication status:
Accepted
Publication type:
Publication form:
Published date:
ISSN:
Volume:
34
Start page:
222
End page:
234
Total:
12
Pagination:
222-234
Digital Object Identifier:
10.1016/j.irfa.2014.03.003
Attached files embargo period:
Immediate release
Attached files release date:
15th April, 2014
Access state:
Active

Institutional metadata

University researcher(s):

Record metadata

Manchester eScholar ID:
uk-ac-man-scw:223431
Created by:
Hyde, Stuart
Created:
15th April, 2014, 15:13:57
Last modified by:
Hyde, Stuart
Last modified:
11th December, 2015, 08:01:51

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