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The Chicago Climate Exchange and market efficiency: an empirical analysis

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  • Omid Sabbaghi

    (University of Detroit Mercy)

  • Navid Sabbaghi

    (University of San Francisco)

Abstract

This study provides the first empirical investigation of informational efficiency for the Chicago Climate Exchange. Using daily settlement price and trading volume data for the Carbon Financial Instruments, we conduct a battery of econometric tests in assessing weak-form market efficiency for the Chicago Climate Exchange during its Phases I and II. Results of the empirical tests collectively suggest an absence of weak-form informational efficiency during Phase I, yet signs of improvement in informational efficiency during Phase II. Our results highlight the dual roles of trading activity and government regulation in promoting informationally efficient and well-functioning carbon markets in the United States.

Suggested Citation

  • Omid Sabbaghi & Navid Sabbaghi, 2017. "The Chicago Climate Exchange and market efficiency: an empirical analysis," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 19(4), pages 711-734, October.
    • Handle: RePEc:spr:envpol:v:19:y:2017:i:4:d:10.1007_s10018-016-0171-4
    DOI: 10.1007/s10018-016-0171-4
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    2. Ajay K. Dhamija & Surendra S. Yadav & PK Jain, 2018. "Volatility spillover of energy markets into EUA markets under EU ETS: a multi-phase study," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 20(3), pages 561-591, July.
    3. Sheng Hu & Pan Zhang & Taoyuan Wei, 2022. "Financial Measures to Reduce Carbon Emissions in Britain, Japan and the United States: A SWOT Analysis," IJERPH, MDPI, vol. 19(17), pages 1-18, August.
    4. Gordon N. Merrick, 2021. "A Lens for Analysis of Payment for Ecosystem Services Systems: Transitioning the Working Lands Economic Sector from Extractive Industry to Regenerative System," Land, MDPI, vol. 10(6), pages 1-19, June.

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    More about this item

    Keywords

    Market efficiency; Carbon markets; Chicago Climate Exchange;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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