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Carbon Prices Forecasting Using Group Information

Author

Listed:
  • Xiaohang Ren
  • Kang Yuan
  • Lizhu Tao
  • Cheng Yan

    (School of Business, Central South University, China)

Abstract

We select 44 macroeconomic variables as predictors and employ multiple statistical models to forecast EU carbon futures price returns. The predictors in this study are high-dimensional and have the group structure, and we find that, in this case, the accuracy of the high-dimensional models for forecasting carbon prices are higher than traditional time series models. In addition, the introduction of group structure variables into the high-dimensional model improves forecasting performance.

Suggested Citation

  • Xiaohang Ren & Kang Yuan & Lizhu Tao & Cheng Yan, 2024. "Carbon Prices Forecasting Using Group Information," Energy RESEARCH LETTERS, Asia-Pacific Applied Economics Association, vol. 4(4), pages 1-6.
    • Handle: RePEc:ayb:jrnerl:92
    DOI: 2024/07/09
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    References listed on IDEAS

    as
    1. Benz, Eva & Trück, Stefan, 2009. "Modeling the price dynamics of CO2 emission allowances," Energy Economics, Elsevier, vol. 31(1), pages 4-15, January.
    2. Byun, Suk Joon & Cho, Hangjun, 2013. "Forecasting carbon futures volatility using GARCH models with energy volatilities," Energy Economics, Elsevier, vol. 40(C), pages 207-221.
    3. Ming Yuan & Yi Lin, 2006. "Model selection and estimation in regression with grouped variables," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 68(1), pages 49-67, February.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Carbon return predictability; High-dimensional models; Group structure;
    All these keywords.

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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