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Investor Attention and the Carbon Emission Markets in China: A Nonparametric Wavelet-Based Causality Test

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Listed:
  • Yongjie Zhang

    (Tianjin University)

  • Yue Li

    (Tianjin University)

  • Dehua Shen

    (Tianjin University)

Abstract

The prices of carbon emission markets are widely concerned for a long time. This paper firstly employs the Baidu Index as the novel proxy for investor attention and investigates the connection between investor attention and both returns and ranged-based volatilities of the six main carbon emission allowances in China. We adopt the novel nonparametric wavelet-based Granger causality test due to the inherent non-stationarity and nonlinearity characteristics of the carbon prices. We find there exists a bidirectional Granger causal relationship between investor attention and the two variables of the carbon market. Besides, the short-term cycle length is the most common Granger causality in our study. These results can help participants and scholars in China to forecast the price of carbon emission market. The government could employ investor attention to stimulate the carbon emission market.

Suggested Citation

  • Yongjie Zhang & Yue Li & Dehua Shen, 2022. "Investor Attention and the Carbon Emission Markets in China: A Nonparametric Wavelet-Based Causality Test," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 29(1), pages 123-137, March.
    • Handle: RePEc:kap:apfinm:v:29:y:2022:i:1:d:10.1007_s10690-021-09348-2
    DOI: 10.1007/s10690-021-09348-2
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