The Impact of Regulatory Changes on the Efficiency of the Phase II EU ETS European Carbon Futures
This study investigates long-horizon weak form market efficiency in the Phase II EU ETS (European Union Emissions Trading Scheme) Carbon Futures Market. Using data that encompasses exchange based (ECX) trades in Phase I and Phase II ECX CFI futures contracts from January 1, 2008, to September 28, 2010, this study employs various tests of long horizon weak form market efficiency including variance ratio tests, tests of trading rule profitability, and serial correlation. In contrast to prior research that focuses on Phase I EU ETS, this study finds evidence of a significant structural change to the EU ETS from Phase I to Phase II, and supports the efficient market hypothesis during Phase II (2008"“2010). Results suggest that documented improvements in market quality, increasing trading activity, and removal of Phase I market frictions have fostered improvements in market efficiency into and during Phase II.
Yang, Jin Young; Lepone, Andrew; and Sacco, Alexander, "The Impact of Regulatory Changes on the Efficiency of the Phase II EU ETS European Carbon Futures" (2012). All Works. 3480.
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