Does Order Flow in The European Carbon Allowances Market Reveal Information?

Iordanis Kalaitzoglou () and Boulis Ibrahim
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Iordanis Kalaitzoglou: Audencia Recherche - Audencia Business School
Boulis Ibrahim: HWU - Heriot-Watt University [Edinburgh]

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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)
Date: 2013-08-15
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Citations: View citations in EconPapers (9)

Published in Journal of Financial Markets, 2013, 16 (3), pp.604-635. ⟨10.1016/j.finmar.2012.11.002⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00859245

DOI: 10.1016/j.finmar.2012.11.002

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