Arbitrage opportunities and feedback trading in emissions and energy markets

Article

Chau, F., Kuo, J. and Shi, Y. 2015. Arbitrage opportunities and feedback trading in emissions and energy markets. Journal of International Financial Markets, Institutions and Money. 36, pp. 130-147. https://doi.org/10.1016/j.intfin.2015.02.002
TypeArticle
TitleArbitrage opportunities and feedback trading in emissions and energy markets
AuthorsChau, F., Kuo, J. and Shi, Y.
Abstract

This paper extends Sentana and Wadhwani (SW 1992) model to study the presence of feedback trading in emissions and energy markets and the extent to which such behaviour is linked to the level of arbitrage opportunities. Applying our augmented models to the carbon emission and major energy markets in Europe, we find evidence of feedback trading in coal and electricity markets, but not in carbon market where the institutional investors dominate. This finding is consistent with the notion that institutional investors are less susceptible to pursuing feedback-style investment strategies. In further analysis, our results show that the intensity of feedback trading is significantly related to the level of arbitrage opportunities, and that the significance of such relationship depends on the market regimes.

KeywordsFeedback trading; Arbitrage opportunities; Emissions and energy markets; Conditional volatility
PublisherElsevier
JournalJournal of International Financial Markets, Institutions and Money
ISSN1042-4431
Publication process dates
Deposited20 Apr 2015
SubmittedMay 2015
Output statusPublished
Accepted author manuscript
Copyright Statement

From SHERPA/RoMEO: Author's post-print on open access repository after an embargo period of 36 months

Additional information

Available online 9 February 2015

Digital Object Identifier (DOI)https://doi.org/10.1016/j.intfin.2015.02.002
LanguageEnglish
Permalink -

https://repository.mdx.ac.uk/item/8502q

Log in to edit

Download files

Accepted author manuscript
JIFMIM-14-133R1RevisedManuscript.pdf

  • 22
    total views
  • 19
    total downloads
  • 0
    views this month
  • 7
    downloads this month

Export as