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Title: Volatility in CO2 EUAs returns: a FIGARCH approach
Authors: Belbute, José
Editors: Duarte, António
Simões, Marta
Bação, Pedro
Martins, Rita
Keywords: CO2emissions prices
Issue Date: 10-Jul-2020
Publisher: Almedina
Citation: Belbute, J. (2020); “"Volatility in CO2 EUAs returns: a FIGARCH approach", in Estudos em Homenagem a João Sousa Andrade, Almedina.
Abstract: This paper models volatility in CO2 EUA’s emission returns using a FIGARCH approach. Our findings overwhelmingly suggest that conditional variance in CO2 emissions allowance returns is stationary and mean reverting, but with autocorrelations decaying at a hyperbolic rate, thereby a shock to forecast of future conditional variance will be temporary but it last longer. Our results have important policy implications since the knowledge of the stochastic properties of the conditional variance is of particular relevance for investment decisions in abatement activities, for the design of arbitrage strategies to take advantage of momentary opportunities in energy markets. Moreover, our results also suggest the importance of accounting for the interactions of volatility in EUA’s CO2 emissions market with energy sectors, the economy, and climate both in terms of modeling and forecasting
Type: bookPart
Appears in Collections:ECN - Publicações - Capítulos de Livros
CEFAGE - Publicações - Capítulos de Livros

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