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Asymmetric relationship between carbon emission trading market and stock market: Evidences from China

Fenghua Wen, Lili Zhao, Shaoyi He and Guozheng Yang

Energy Economics, 2020, vol. 91, issue C

Abstract: This paper has investigated the asymmetric relationship between carbon emission trading market and stock market in China by using the nonlinear auto-regressive distributed lag (NARDL) model. Based on our investigation on both of the overall and sector level of stock market, we have obtained interesting and convincing empirical results that show there are significantly negative long-run and short-run asymmetric relationships between carbon emission trading market and overall stock market in China. Specifically, we have noticed that while passing the effects from the former to the later, the increasing of carbon emission trading price would make greater effects on the stock price than its decreasing. Also, on the sector level, carbon emission trading price is significantly related to some energy intense sectors and financial sector stock market. Furthermore, we have surprisingly found out that there are no significant effects passing from stock index to carbon emission trading price in China, neither on the overall level nor on the sector level of stock market.

Keywords: Carbon emission trading market; China stock market; Asymmetric relationship; NARDL model (search for similar items in EconPapers)
JEL-codes: C21 E44 G12 G41 Q43 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.eneco.2020.104850

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Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

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