Evaluation of European Union carbon and energy networks: evidence from market efficiency
Evaluation of European Union carbon and energy networks: evidence from market efficiency
This article investigates dynamic networks of the informational efficiency between European Union carbon and energy markets in a quantile-based framework. The market (in)efficiency degree is gauged by capturing the potentially fractional integration order of the market price series using the Feasible Exact Local Whittle estimator on a rolling basis. Rather than relying on a mean-based method, we employ the causality-in-quantiles approach, through which the cross-market linkage of the inefficiency degree is uncovered in a full-distributional characterization. The dynamic linkage is identified through the perspectives of data in return and volatility, respectively. We find that both carbon and energy markets are inefficient, while the inefficiency degree of the former is slightly higher. The inefficiency degree of the two types of markets is featured by asymmetry and non-linearity over the data distribution, while its cross-market linkage is found to be bi-directional. The spillover degree of the dynamic linkage remains the highest at around the median quantile of the “information giver,” while such the degree weakens at the extreme quantiles. Our findings possess insightful implications for effective operations of the emission trading toward a low carbon transition.
European Union emission trading scheme, Market efficiency, causality-in-quantiles, energy market, network
Ren, Xiaohang
970abdf4-ff20-4244-9952-f9ee910736ee
Li, Yiying
fd7136d1-e6c3-4cb9-af0b-4114a321d497
Duan, Kun
054ecbe5-11bf-4e7d-ad5d-b5dcc2ccd786
Mishra, Tapas
218ef618-6b3e-471b-a686-15460da145e0
16 April 2023
Ren, Xiaohang
970abdf4-ff20-4244-9952-f9ee910736ee
Li, Yiying
fd7136d1-e6c3-4cb9-af0b-4114a321d497
Duan, Kun
054ecbe5-11bf-4e7d-ad5d-b5dcc2ccd786
Mishra, Tapas
218ef618-6b3e-471b-a686-15460da145e0
Ren, Xiaohang, Li, Yiying, Duan, Kun and Mishra, Tapas
(2023)
Evaluation of European Union carbon and energy networks: evidence from market efficiency.
Energy & Environment.
(doi:10.1177/0958305X231156411).
Abstract
This article investigates dynamic networks of the informational efficiency between European Union carbon and energy markets in a quantile-based framework. The market (in)efficiency degree is gauged by capturing the potentially fractional integration order of the market price series using the Feasible Exact Local Whittle estimator on a rolling basis. Rather than relying on a mean-based method, we employ the causality-in-quantiles approach, through which the cross-market linkage of the inefficiency degree is uncovered in a full-distributional characterization. The dynamic linkage is identified through the perspectives of data in return and volatility, respectively. We find that both carbon and energy markets are inefficient, while the inefficiency degree of the former is slightly higher. The inefficiency degree of the two types of markets is featured by asymmetry and non-linearity over the data distribution, while its cross-market linkage is found to be bi-directional. The spillover degree of the dynamic linkage remains the highest at around the median quantile of the “information giver,” while such the degree weakens at the extreme quantiles. Our findings possess insightful implications for effective operations of the emission trading toward a low carbon transition.
Text
Energy and Env-Tapas Mishra
- Accepted Manuscript
More information
Accepted/In Press date: 10 April 2023
e-pub ahead of print date: 16 April 2023
Published date: 16 April 2023
Additional Information:
Publisher Copyright:
© The Author(s) 2023.
Keywords:
European Union emission trading scheme, Market efficiency, causality-in-quantiles, energy market, network
Identifiers
Local EPrints ID: 478791
URI: http://eprints.soton.ac.uk/id/eprint/478791
ISSN: 0958-305X
PURE UUID: 053fe11f-eccc-4d34-9aef-dbad98976039
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Date deposited: 10 Jul 2023 16:45
Last modified: 17 Mar 2024 03:36
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Author:
Xiaohang Ren
Author:
Yiying Li
Author:
Kun Duan
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