Informational efficiency of the US SO2 permit market

Johan Albrecht, Tom Verbeke () and M. de Clercq ()
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M. de Clercq: -

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: We test the information efficiency of the market for SO2 permits in the US. In order to do so, we perform a number of unit root tests and test if the changes in the SO2 permit price are serially correlated. Furthermore, we test if it would have been possible to earn a profit based on knowledge on the SO2 permit’s price history. The evidence presented in this paper suggests that this market is efficient from an informational point of view. Although one could question this hypothesis from a statistical point of view, economic significance suggests that this market is indeed efficient.

Keywords: SO2; tradable permits market; market efficiency; unit roots; random walk hypothesis. (search for similar items in EconPapers)
Pages: 30 pages
Date: 2004-06
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:04/250

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