Volatility spillover across Chinese carbon markets: Evidence from quantile connectedness method
Energy Economics
; 119, 2023.
Article
in English
| Scopus | ID: covidwho-2242701
ABSTRACT
The paper investigates the volatility spillover across China's carbon emission trading (CET) markets using the connectedness method based on the quantile VAR framework. The non-linear result shows strong volatility spillover effects in upper quantiles, resulting from major economic and political events. This is in accordance with the risk contagion hypothesis that volatility of carbon price returns is affected by the shocks of economic fundamentals and spills over to other pilots. Guangdong and Shanghai are the most significant contributors to volatility transmission because of their high liquidity and active markets. Hubei CET pilot has shifted from transmitter to receiver since the COVID-19 pandemic. Regarding the pairwise directional connectedness, geographical location and similar market attribute also matter in volatility transmission. This provides implications for policymakers and investors to attach importance to risk management given the quantile-based method rather than the average shocks. © 2023 Elsevier B.V.
Carbon; Commerce; COVID-19; Emission control; Investments; Transmissions; Value engineering; Carbon emission trading; Carbon emission trading pilot; Carbon markets; Emission trading markets; Non linear; Quantile VAR; Risk contagion; Spillover effects; Volatility spillovers; Volatility transmissions; Risk management; Volatility spillover
Full text:
Available
Collection:
Databases of international organizations
Database:
Scopus
Language:
English
Journal:
Energy Economics
Year:
2023
Document Type:
Article
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