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Title: Impact of the Allowance Submissions in European Carbon Emission Markets
Authors: Shi, Yukun
Philip, D.
First Published: 26-May-2015
Publisher: Elsevier
Citation: International Review of Financial Analysis, 2015, 40, pp. 27-37
Abstract: This paper studies the impact of the April allowance submissions mandate under the European Union emission trading scheme (EU ETS) in carbon emission markets. Using intraday order flow data, we test for the cross-market efficiency of spot-futures dynamics and find that the equilibrium level, adjustment speed and no-arbitrage boundaries of the spot and futures relationship shift subsequent to the submission date. In addition, our results show that the allowance submissions affect the price discovery process, with the carbon spot market providing stronger price leadership in the periods before the submission date and the futures market playing the predominant informational role thereafter. Using the heterogeneous autoregressive realized volatility (HAR-RV) model, we also find a change in volatility spillovers before the submission date, particularly from the spot to the futures market. Overall, the results suggest that the April allowance submissions have significant impact on the time series dynamics of spot and futures carbon emission markets.
DOI Link: 10.1016/j.irfa.2015.05.004
ISSN: 1057-5219
Embargo on file until: 26-May-2018
Version: Post-print
Status: Peer-reviewed
Type: Journal Article
Rights: Copyright © 2015 Elsevier Inc. All rights reserved. This manuscript version is made available after the end of the embargo period under the CC-BY-NC-ND 4.0 license 
Description: The file associated with this record is under a 36-month embargo from publication in accordance with the publisher's self-archiving policy. The full text may be available through the publisher links provided above.
Appears in Collections:Published Articles, School of Management

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