Emission Permits and the Announcement of Realized Emissions: Price Impact, Trading Volume, and Volatilities

27 Pages Posted: 19 Jul 2013 Last revised: 10 Nov 2016

See all articles by Steffen Hitzemann

Steffen Hitzemann

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick

Marliese Uhrig-Homburg

Karlsruhe Institute of Technology (KIT) - Institute for Finance

Karl-Martin Ehrhart

University of Karlsruhe

Date Written: June 2015

Abstract

This paper investigates the impact of the yearly announcement of realized emissions on the European carbon permit market. We find that this event generally leads to significant absolute abnormal returns on the event day, which are accompanied by increased trading volumes and high intraday volatilities. To the contrary, trading is particularly calm on the days before the event, as suggested by significantly lower trading volumes and volatilities. The high event-day volatility is expected by the market and incorporated in emission permit option prices. In line with these significant market reactions, we provide evidence that the emissions announcement has an outstanding information content for the market compared to other relevant news events.

Keywords: emission permits, announcement effects, EU ETS

JEL Classification: G12, G13, G14, H23, Q54, Q56

Suggested Citation

Hitzemann, Steffen and Uhrig-Homburg, Marliese and Ehrhart, Karl-Martin, Emission Permits and the Announcement of Realized Emissions: Price Impact, Trading Volume, and Volatilities (June 2015). Energy Economics, Vol. 51, 2015, Available at SSRN: https://ssrn.com/abstract=2295069 or http://dx.doi.org/10.2139/ssrn.2295069

Steffen Hitzemann (Contact Author)

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick ( email )

1 Washington Park
Newark, NJ 07102
United States

Marliese Uhrig-Homburg

Karlsruhe Institute of Technology (KIT) - Institute for Finance ( email )

P.O. Box 6980
D-76049 Karlsruhe, DE
Germany
+49 721 6084 8183 (Phone)
+49 721 6084 8190 (Fax)

HOME PAGE: http://derivate.fbv.kit.edu/english/index.php

Karl-Martin Ehrhart

University of Karlsruhe ( email )

Postbox
76128 Karlsruhe, DE 76128
Germany

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