Is Information Assimilated at Announcements in the European Carbon Market?

30 Pages Posted: 9 Jun 2015 Last revised: 15 Feb 2017

See all articles by Jiayuan Chen

Jiayuan Chen

University College Dublin (UCD)

Cal B. Muckley

University College Dublin

Don Bredin

University College Dublin (UCD) - Department of Banking & Finance

Date Written: February 7, 2017

Abstract

We examine the high frequency new information impact on prices, volatility, trading volume and illiquidity at scheduled macroeconomic and verified emissions announcements for the European carbon futures market. Verified emissions, United States non-farm payroll and German new factory order macroeconomic announcements impact carbon prices swiftly, within 5 minutes. We show that a one standard deviation surprise increase in verified emission announcements is associated with an approximate ten percentage point (9.96%) increase in carbon futures returns. A wait-and-see stylized trading behavior is evident at announcements in volatility and trading volumes. Market illiquidity increases at announcements in relation to United States non-farm payroll, albeit there is no evidence of an increase in illiquidity prior to announcements. The development of new information impact, over time, occurs mainly in the at-announcement 5-minute time interval.

Keywords: Carbon trading; market microstructure; public information announcements; information assimilation

JEL Classification: G13, G14, G19

Suggested Citation

Chen, Jiayuan and Muckley, Cal B. and Bredin, Don, Is Information Assimilated at Announcements in the European Carbon Market? (February 7, 2017). Available at SSRN: https://ssrn.com/abstract=2616054 or http://dx.doi.org/10.2139/ssrn.2616054

Jiayuan Chen

University College Dublin (UCD) ( email )

Belfield
Belfield, Dublin 4 4
Ireland

Cal B. Muckley (Contact Author)

University College Dublin ( email )

Blackrock, Co. Dublin
Ireland
+353-1-716-8091 (Phone)

Don Bredin

University College Dublin (UCD) - Department of Banking & Finance ( email )

School of Business
Blackrock, Co. Dublin, 4
Ireland

HOME PAGE: http://www.ucd.ie/bankingfinance/staff_bredin.html

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