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On Volatility Linkages among Carbon Price, Stock Price, Interest Rate and Exchange Rate

Author

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  • Amane Saito

    (Graduate School of Economics, Osaka University)

Abstract

In this paper, we investigate the volatility interactions and market anomalies of carbon price, stock price, interest rate, and exchange rate using the Stochastic Volatility (SV) model. As results of analyses, the estimates of the price changes of each asset showed limited significances on the interactions and market anomalies. On the other hand, the estimates of volatilities of each asset showed significant effects of both interactions and market anomalies. As volatility interactions, volatility spillover or asymmetric effects were detected for all assets and many of them were found to spill over to each other. As for the market anomalies, we detected holiday effects in carbon price and stock price, where volatility increases after holidays due to the increase in the amount of information. In addition, asymmetry effects were detected for all assets, and Friday effect was found for foreign exchange rate.

Suggested Citation

  • Amane Saito, 2021. "On Volatility Linkages among Carbon Price, Stock Price, Interest Rate and Exchange Rate," Discussion Papers in Economics and Business 21-20, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:2120
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    File URL: http://www2.econ.osaka-u.ac.jp/econ_society/dp/2120.pdf
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    More about this item

    Keywords

    Carbon Price; SV model; Volatility Spillover; Market Anomaly (holiday effect; asymmetry effect; day-of-the-week effect);
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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