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Investor attention and carbon return: evidence from the EU-ETS

Author

Listed:
  • Yinpeng Zhang
  • Ying Chen
  • You Wu
  • Panpan Zhu

Abstract

This paper firstly puts forward to employ investor attention obtained from Google trends to explain and forecast carbon futures return in the European Union-Emission Trading Scheme (EU-ETS). Our empirical results show that investor attention is a granger cause to changes in carbon return. Furthermore, investor attention generates both linear and non-linear effects on carbon return. The results demonstrate that investor attention shows excellent explanatory power on carbon return. Moreover, we conduct several out-of-sample forecasts to explore the predictive power of investor attention. The results indicate that incorporating investor attention indeed improve the accuracy of out-of-sample forecasts both in short and long horizons and can generate significant economic values. All results demonstrate that investor attention is a non-negligible pricing factor in carbon market.

Suggested Citation

  • Yinpeng Zhang & Ying Chen & You Wu & Panpan Zhu, 2022. "Investor attention and carbon return: evidence from the EU-ETS," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 35(1), pages 709-727, December.
    • Handle: RePEc:taf:reroxx:v:35:y:2022:i:1:p:709-727
    DOI: 10.1080/1331677X.2021.1931914
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    Cited by:

    1. Panpan Zhu & Qingjie Zhou & Yinpeng Zhang, 2024. "Investor attention and consumer price index inflation rate: Evidence from the United States," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-12, December.
    2. Wang, Juling & Liu, Lihua & Ou, Yangchao, 2024. "Low-carbon city pilot policy and corporate environmental violations: Evidence from heavily polluting firms in China," Finance Research Letters, Elsevier, vol. 65(C).

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