Applications of Long-Memory and Structure Breaks for Carbon Indexes

Do Thi Van Trang and Jo-Hui Chen
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Do Thi Van Trang: Postgraduate Faculty, Banking Academy, Hanoi, Vietnam
Jo-Hui Chen: Department of Finance, Chung Yuan Christian University, Chung-Li, Taiwan

International Journal of Energy Economics and Policy, 2023, vol. 13, issue 3, 579-585

Abstract: This paper aims to investigatethe long-memory properties of four carbon indexes by utilizing the autoregressive frictionally integrated moving average fractionally integrated general autoregressive conditional heteroskedasticity models. First, this study discovered a significant long-memory effect for two carbon indexes such as CCX and JOI, whereas others like CER and EUA possess intermediate memory in the returns. Second, the multiple structure breaks in the four carbon indexes were examined using the iterated cumulative sum of squares algorithm. Evidence shows that the sudden shifts are mainly attributed to macroeconomic factors, energy dynamics, and political policies.

Keywords: Carbon index; ARFIMA-FIGARCH models; Structure break; ICSS algorithm (search for similar items in EconPapers)
JEL-codes: O13 Q53 Q56 (search for similar items in EconPapers)
Date: 2023
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