Open AccessVisible and Invisible Forces. What Drives the Intensity of Trading in the European Carbon Market?
Author(s) -
Iordanis Kalaitzoglou
Publication year - 2019
Publication title -
review of economic analysis
Language(s) - English
Resource type - Journals
ISSN - 1973-3909
DOI - 10.15353/rea.v11i1.1519
Subject(s) - unobservable , carbon market , futures contract , transparency (behavior) , futures market , emissions trading , economics , observable , intensity (physics) , european union , business , econometrics , financial economics , climate change , international economics , ecology , computer science , physics , computer security , quantum mechanics , biology
This study models the trading intensity in European Allowances (EUA) futures contracts, in the European Climate Exchange (ECX) using various specifications and investigates the forecasting ability of observable versus unobservable factors. This set up tests empirically the impact of the evolving market structure through regulatory updates and the contribution of the different market participants to the intensity of trading in the European Carbon market. The findings suggest that observable market characteristics capture better the dynamics of trading intensity than their latent counterparts, which implies that regulatory changes that enhance transparency would also improve market efficiency.