Information Assimilation in the EU Emissions Trading Scheme: A Microstructure Study
Miss Jiayuan Chen, Michael Smurfit School of University College Dublin The European Union’s Emissions Trading Scheme (ETS) is the key policy instrument of the European Commission’s Climate Change Program aimed at reducing carbon emissions to eight percent below 1990 levels by 2012. The key asset traded under the scheme is the European Union Allowance (EUA). This article examines the extent of information assimilation in the futures market of the European Union’s ETS. Using ultra high frequency data, we examine intraday futures market behaviour around major scheduled macroeconomic and emissions information announcements during Phase 2 of the European Union’s ETS, 2008-12. We examine December expiration contracts in 2008, 2009, 2010 and in 2011. Our study of intra-day behaviour of the European Union’s ETS futures market relates to price volatility and spreads as well as trading volume and order imbalances. In particular, we address questions such as [1] does contemporaneous order imbalance impact market returns in the anticipated direction – do excess buy (sell) orders drive up (down) prices?; [2] do order imbalance and returns respond to announcements in a way that Read more…
Categories: Academic Papers, Energy and environment, Energy economics
Tags: Carbon trading, conference 2012, derivatives, ETS, European Energy in a Challenging World, market efficiency, market microstructure
Information-Assimilation-in-the-EU-Emissions-Trading-Scheme-A-Microstructure-study.pdf 2.07 MBCHEN-Information-ssimilation-in-the-EU-Emissions-Trading-Scheme.pdf 435.9 KBSep
2012