Ambiguity in markets: A test in an Australian emissions market

Deborah Cotton () and David Michayluk ()

Published Paper Series from Finance Discipline Group, UTS Business School, University of Technology, Sydney

Abstract: Research suggests that ambiguity not only reduces the desirability to trade but also the overall effectiveness of financial markets. This paper tests the hypothesis that information related to climate change mitigation in Australia reduces the ambiguity surrounding investor participation in Australia’s largest emissions trading scheme. This market was chosen due to the high level of ambiguity surrounding government policy and the ability to determine the factors likely to reduce ambiguity. We use government announcements and international and locally significant events as sources of information. From this we find that information does reduce the level of ambiguity, as shown by reduced bid-ask spreads and increased relative trading volume.

Keywords: Ambiguity; Market efficiency; Emissions Trading (search for similar items in EconPapers)
Pages: 21 pages
Date: 2014-01-01
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Published as: Cotton, D. and Michayluk, D. M., 2014, "Ambiguity in markets: A test in an Australian emissions market", ACRN Journal of Finance and Risk Perspectives, 3(4), 99-119.

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Persistent link: https://EconPapers.repec.org/RePEc:uts:ppaper:2014-1

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