The Empirical Relationship of Carbon Future Price Return, Oil Future Price Return and Stock Index Future Price Return

• Main Authors: Ya-Ling Liu, 劉雅玲
• Other Authors: Ching-Chun Wei
• Format: Others
• Language: en_US
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/81529125319740623554

碩士 === 靜宜大學 === 財務金融學系 === 99 === The European Union Emission Trading Scheme (EU ETS) has established a pricing system for carbon emissions. The interest in analyzing the carbon market from a financial point of view has exponentially increased since the launch of the EU ETS. The trading of carbon emissions has resulted in a new class of financial instrument. The trading of carbon emissions has resulted in a new class of financial instrument. As the new commodity may increase the diversification of a financial portfolio and reduce the overall investment risk, a deeper investigation of its properties is needed. Investigating the link between carbon and other asset classes, such oil and stock markets, is important to understand how carbon market interacts with other financial markets. This paper discusses the interaction among carbon futures returns, oil futures returns and stock index futures returns, with the sample period from April 22, 2005 to January 31, 2011. Empirical results indicate that carbon futures returns do respond positively to oil returns shock. A shock in oil price initially has a positive impact on stock market. The multivariate generalized autoregressive conditional heteroskedasticity (GARCH) of the BEKK model indicate that oil market has an effect on the volatility of the other two markets but it is much less affect by them. These results should be useful for policy makers, portfolio managers and others interested in this rapidly developing field of finance.