Does Investor Attention Matter in Carbon Pricing? Empirical Evidence from Crude Oil Market

Panpan Zhu and Yinpeng Zhang

SAGE Open, 2025, vol. 15, issue 2, 21582440251322624

Abstract: The novelty of this paper lies in the successful explanation and forecasting of carbon market from the perspective of crude oil attention. In this paper, based on the data on carbon futures and investor attention, several models are adopted to explore the role of crude oil attention on return and realized volatility in the carbon market. The empirical results are generalized as follows. First, crude oil attention granger causes the changes to carbon market, and besides, crude oil attention exerts significant negative impacts on carbon return while positive impacts on the realized volatility. Second, crude oil attention-based models improve the forecast accuracy for return and realized volatility in both short and long horizons and can surely bring investors with significant economic benefits. Third, this paper further confirms the nonlinear connections, the potential influencing mechanism, and subsample performances between crude oil attention and the carbon market. In summary, this paper broadens the framework of carbon pricing from investor attention and proves the importance of crude oil attention in the carbon market.

Keywords: crude oil attention; carbon market; investor attention; out-of-sample forecasts (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:sae:sagope:v:15:y:2025:i:2:p:21582440251322624

DOI: 10.1177/21582440251322624

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