The Return and Volatility Spillover between Carbon Futures Market and Global Financial, Energy and Commodity Futures Markets

10 Pages Posted: 2 Jun 2015

See all articles by Ziran Li

Ziran Li

Chinese Academy of Sciences (CAS) - Center for Forecasting Science

Mengchen Ji

Chinese Academy of Sciences (CAS) - Academy of Mathematics and Systems Sciences

Han Qiao

University of Chinese Academy of Sceinces

Shouyang Wang

Chinese Academy of Sciences (CAS) - Center for Forecasting Science; Academy of Mathematics and Systems Sciences

Date Written: March 1, 2015

Abstract

Financialization of carbon market and global economy have made the fluctuation of carbon emission allowance prices vulnerable to international shocks and risk management become more and more complicated for both investors and fossil fuel consumption enterprises. Based on studying the ergodicity of the Granger causality test for different lag-lengths, this paper investigates the return and volatility transmission between carbon futures price and a data set of 19 financial, energy and commodity time series results show that there exists several causal relationships between carbon futures market and financial, energy and commodity futures markets. The connections between carbon futures market and financial markets are especially strong. Despite that spillovers in different phases are different, volatility linkage between carbon futures markets and these markets is closer and stronger than the return linkage in general. Moreover, extreme returns and risks also have significant leading impacts on regular returns and risks.

Keywords: Carbon futures, spillover, Granger causality test, ergodicity

JEL Classification: C10, G15

Suggested Citation

Li, Ziran and Ji, Mengchen and Qiao, Han and Wang, Shouyang, The Return and Volatility Spillover between Carbon Futures Market and Global Financial, Energy and Commodity Futures Markets (March 1, 2015). Available at SSRN: https://ssrn.com/abstract=2613242 or http://dx.doi.org/10.2139/ssrn.2613242

Ziran Li

Chinese Academy of Sciences (CAS) - Center for Forecasting Science ( email )

China

Mengchen Ji

Chinese Academy of Sciences (CAS) - Academy of Mathematics and Systems Sciences ( email )

Zhong-Guan-Cun-Dong-Lu 55, Haidian District
Beijing, 100080, P.R., Beijing 100080
China

Han Qiao (Contact Author)

University of Chinese Academy of Sceinces ( email )

80 Zhong-Guan-Cun East Road
No. 7 Building, Office 306
Beijing, Beijing 100190
China
+86-10-82680917 (Phone)

HOME PAGE: http://mscas-en.ucas.ac.cn/index.php/res/div/1138-qiao-han

Shouyang Wang

Chinese Academy of Sciences (CAS) - Center for Forecasting Science; Academy of Mathematics and Systems Sciences ( email )

China

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