On Volatility Linkages among Carbon Price, Stock Price, Interest Rate and Exchange Rate

Amane Saito ()
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Amane Saito: Graduate School of Economics, Osaka University

No 21-20, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: In this paper, we investigate the volatility interactions and market anomalies of carbon price, stock price, interest rate, and exchange rate using the Stochastic Volatility (SV) model. As results of analyses, the estimates of the price changes of each asset showed limited significances on the interactions and market anomalies. On the other hand, the estimates of volatilities of each asset showed significant effects of both interactions and market anomalies. As volatility interactions, volatility spillover or asymmetric effects were detected for all assets and many of them were found to spill over to each other. As for the market anomalies, we detected holiday effects in carbon price and stock price, where volatility increases after holidays due to the increase in the amount of information. In addition, asymmetry effects were detected for all assets, and Friday effect was found for foreign exchange rate.

Keywords: Carbon Price; SV model; Volatility Spillover; Market Anomaly (holiday effect; asymmetry effect; day-of-the-week effect) (search for similar items in EconPapers)
JEL-codes: C58 G17 Q50 (search for similar items in EconPapers)
Pages: 20pages
Date: 2021-11
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