Does order flow in the European Carbon Futures Market reveal information?

Iordanis Kalaitzoglou and Boulis M. Ibrahim

Journal of Financial Markets, 2013, vol. 16, issue 3, 604-635

Abstract: This paper identifies the classes of agents at play in the European Carbon Futures Market and analyzes their trading behaviour during the market's early development period. A number of hypotheses related to microstructure are tested using enhanced ACD models. Evidence is presented that the market is characterized by three different groups of traders: informed, fundamental, and uninformed. OTC trades are distinct to regular trades and are used strategically by the informed. Fundamental traders react faster in Phase II and the informed counteract by increasing their trade size and speed. The results indicate enhanced market transparency and increased market maturity.

Keywords: Carbon market; Microstructure; Duration model; Ultra-high-frequency data (search for similar items in EconPapers)
JEL-codes: C41 C58 G15 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:16:y:2013:i:3:p:604-635

DOI: 10.1016/j.finmar.2012.11.002

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