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Does the carbon market signal the market efficiency of clean and dirty cryptocurrencies? An analysis of quantile directional dependence

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  • Wei, Yu
  • Hu, Rui
  • Zhang, Jiahao
  • Wang, Qian

Abstract

The role of the carbon market in the market efficiency of cryptocurrencies has not received much attention from scholars, despite its particular relevance for integrating environmental externalities into the theory and practice of digital financial markets. We investigate whether and how the performance of the carbon market during busts and booms affects the market efficiency of both clean and dirty cryptocurrencies. Overall, our results underscore the complex quantile dependence of cryptocurrency market efficiency on carbon market performance, highlighting significant variability in how different types of cryptocurrencies respond to carbon market. These results have significant implications for regulatory policies, investment strategies, industry practices, public perceptions, and technological advances in the pursuit of aligning cryptocurrency markets with environmental sustainability goals.

Suggested Citation

  • Wei, Yu & Hu, Rui & Zhang, Jiahao & Wang, Qian, 2024. "Does the carbon market signal the market efficiency of clean and dirty cryptocurrencies? An analysis of quantile directional dependence," Finance Research Letters, Elsevier, vol. 67(PB).
    • Handle: RePEc:eee:finlet:v:67:y:2024:i:pb:s1544612324009437
    DOI: 10.1016/j.frl.2024.105913
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    More about this item

    Keywords

    Clean cryptocurrency; Dirty cryptocurrency; Carbon market; Market efficiency; Cross-quantilogram technique;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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