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Please use this identifier to cite or link to this item: http://hdl.handle.net/1893/1704

Appears in Collections:Economics Working Papers
Peer Review Status: Unrefereed
Title: Carbon trading thickness and market efficiency: A non-parametric test
Author(s): Montagnoli, Alberto
de, Vries Frans
Contact Email: f.p.devries@stir.ac.uk
Citation: Montagnoli A & de Vries F (2009) Carbon trading thickness and market efficiency: A non-parametric test. Stirling Economics Discussion Paper, 2009-22.
Keywords: pollution markets
carbon trading
efficient market hypothesis
thin trading
variance ratio tests
JEL Code(s): C14
G14
Q50
Issue Date: Oct-2009
Series/Report no.: Stirling Economics Discussion Paper, 2009-22
Abstract: This note tests for the efficient market hypothesis (EMH) in the market for CO2 emission allowances in Phase I and Phase II of the European Union Emissions Trading Scheme (EU ETS). As usually is the case in emerging and non-competitive markets such as the EU ETS, trading often not occurs on a frequent basis. This has adverse implications for both the gains from permit trade as well as biases the EMH tests. Variance ratio tests are employed to adjust for the thin trading effect. The results indicate that Phase I – the trial and learning period – was inefficient, whereas the first period under Phase II shows signs of restoring market efficiency.
Type: Working or Discussion Paper
URI: http://hdl.handle.net/1893/1704
Affiliation: Economics
Economics

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