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Testing market efficiency in the EU carbon futures market

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  • Roselyne Joyeux
  • George Milunovich

Abstract

We use the cost-of-carry model to investigate the extent of market efficiency in the EU futures market for carbon dioxide allowances over the period of June 2005 to December 2007. We reject the cost-of-carry hypothesis for the entire data sample, but find some evidence of improvement in market efficiency over the period. Recursive estimates of some cost-of-carry model parameters start approaching their theoretical values when estimated on progressively smaller and more recent sub-samples.

Suggested Citation

  • Roselyne Joyeux & George Milunovich, 2010. "Testing market efficiency in the EU carbon futures market," Applied Financial Economics, Taylor & Francis Journals, vol. 20(10), pages 803-809.
    • Handle: RePEc:taf:apfiec:v:20:y:2010:i:10:p:803-809
    DOI: 10.1080/09603101003636220
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