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Is information assimilated at announcements in the European carbon market?

Author

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  • Chen, Jiayuan
  • Muckley, Cal B.
  • Bredin, Don

Abstract

We examine the high frequency new information impact on prices, volatility, trading volume and illiquidity at scheduled macroeconomic and verified emissions announcements for the European carbon futures market. Verified emissions, United States non-farm payroll and German new factory order macroeconomic announcements impact carbon prices swiftly, within 5min. We show that a one standard deviation surprise increase in verified emission announcements is associated with an approximate ten percentage point (9.96%) increase in carbon futures returns. A wait-and-see stylized trading behavior is evident at announcements in volatility and trading volumes. Market illiquidity increases at announcements in relation to United States non-farm payroll, albeit there is no evidence of an increase in illiquidity prior to announcements. The development of new information impact, over time, occurs mainly in the at-announcement 5-minute time interval.

Suggested Citation

  • Chen, Jiayuan & Muckley, Cal B. & Bredin, Don, 2017. "Is information assimilated at announcements in the European carbon market?," Energy Economics, Elsevier, vol. 63(C), pages 234-247.
    • Handle: RePEc:eee:eneeco:v:63:y:2017:i:c:p:234-247
    DOI: 10.1016/j.eneco.2017.02.009
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    2. Herrera, Gabriel Paes & Constantino, Michel & Su, Jen-Je & Naranpanawa, Athula, 2022. "Renewable energy stocks forecast using Twitter investor sentiment and deep learning," Energy Economics, Elsevier, vol. 114(C).

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    More about this item

    Keywords

    Carbon trading; Market microstructure; Public information announcements; Information assimilation;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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