Price discovery and volatility spillovers in the European Union emissions trading scheme: a high-frequency analysis
This paper models the relationship of European Union Allowance spot- and futures-prices within the second commitment period of the European Union emissions trading scheme. Based on high-frequency data, we analyze the transmission of information in first and second conditional moments. To reveal long...
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| Format: | Article (Journal) |
| Language: | English |
| Published: |
2012
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| In: |
Journal of banking and finance
Year: 2011, Volume: 36, Issue: 3, Pages: 774-785 |
| ISSN: | 1872-6372 |
| DOI: | 10.1016/j.jbankfin.2011.09.009 |
| Online Access: | Verlag, Volltext: http://dx.doi.org/10.1016/j.jbankfin.2011.09.009 Verlag, Volltext: http://www.sciencedirect.com/science/article/pii/S0378426611002639 
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| Author Notes: | Daniel Rittler |
| Summary: | This paper models the relationship of European Union Allowance spot- and futures-prices within the second commitment period of the European Union emissions trading scheme. Based on high-frequency data, we analyze the transmission of information in first and second conditional moments. To reveal long-run price discovery, we compute common factor weights of Schwarz and Szakmary (1994) and information shares of Hasbrouck (1995) based on estimated coefficients of a VECM. To analyze the short-run dynamics, we perform Granger-causality tests. We identify the futures market to be the leader of the long-run price discovery process, whereas the informational role of the futures market increases over time. In addition, we employ a version of the UECCC-GARCH model as introduced by Conrad and Karanasos (2010) to analyze the volatility transmission structure. The volatility analysis indicates a close relationship between the volatility dynamics of both markets, whereas in particular we observe spillovers from the futures to the spot market. As a whole the investigation reveals that the futures market incorporates information first and then transfers the information to the spot market. |
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| Item Description: | Available online 19 September 2011 Gesehen am 29.06.2018 |
| Physical Description: | Online Resource |
| ISSN: | 1872-6372 |
| DOI: | 10.1016/j.jbankfin.2011.09.009 |