Using EGARCH models to predict volatility in unconsolidated financial markets: the case of European carbon allowances

Author:

Villar-Rubio ElenaORCID,Huete-Morales María-Dolores,Galán-Valdivieso Federico

Abstract

Abstract The growing interest and direct impact of carbon trading in the economy have drawn an increasing attention to the evolution of the price of CO2 allowances (European Union Allowances, EUAs) under the European Union Emissions Trading Scheme (EU ETS). As a novel financial market, the dynamic analysis of its volatility is essential for policymakers to assess market efficiency and for investors to carry out an adequate risk management on carbon emission rights. In this research, the main autoregressive conditional heteroskedasticity (ARCH) models were applied to evaluate and analyze the volatility of daily data of the European carbon future prices, focusing on the last finished phase of market operations (phase III, 2013–2020), which is structurally and significantly different from previous phases. Some empirical findings derive from the results obtained. First, the EGARCH (1,1) model exhibits a superior ability to describe the price volatility even using fewer parameters, partly because it allows to collect the sign of the changes produced over time. In this model, the Akaike information criterion (AIC) is lower than ARCH (4) and GARCH (1,1) models, and all its coefficients are significative (p < 0.02). Second, a sustained increase in prices is detected at the end of phase III, which makes it possible to foresee a stabilization path with higher prices for the first years of phase IV. These changes will motivate both companies and individual energy investors to be proactive in making decisions about the risk management on carbon allowances.

Funder

Universidad de Granada

Publisher

Springer Science and Business Media LLC

Subject

General Environmental Science,Geography, Planning and Development

Cited by 2 articles. 订阅此论文施引文献 订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献

同舟云学术

1.学者识别学者识别

2.学术分析学术分析

3.人才评估人才评估

"同舟云学术"是以全球学者为主线,采集、加工和组织学术论文而形成的新型学术文献查询和分析系统,可以对全球学者进行文献检索和人才价值评估。用户可以通过关注某些学科领域的顶尖人物而持续追踪该领域的学科进展和研究前沿。经过近期的数据扩容,当前同舟云学术共收录了国内外主流学术期刊6万余种,收集的期刊论文及会议论文总量共计约1.5亿篇,并以每天添加12000余篇中外论文的速度递增。我们也可以为用户提供个性化、定制化的学者数据。欢迎来电咨询!咨询电话:010-8811{复制后删除}0370

www.globalauthorid.com

TOP

Copyright © 2019-2024 北京同舟云网络信息技术有限公司
京公网安备11010802033243号  京ICP备18003416号-3