Testing the Speculative Efficiency Hypothesis on Co2 Emission Allowance Prices: Evidence from Bluenext

24 Pages Posted: 8 May 2011

See all articles by Olivier Darné

Olivier Darné

University of Nantes - Faculty of Business and Economics

Jessica Fouilloux

IGR - IAE de Rennes 1

Amélie Charles

Audencia Nantes School of Management

Date Written: May 1, 2011

Abstract

In this paper, we attempt to examine the speculative efficiency hypothesis on CO2 emission allowance prices negotiated on Bluenext, by testing the relationship between futures and spot prices from the Fama (1970) framework. This approach is based on the joint hypothesis of no risk premium and unbiasedness of futures prices. Cointegration tests are performed to confirm the legitimacy of futures and spot prices being included in the regression, following the approach proposed by Balke and Fomby (1997). The results indicate the absence of linear and nonlinear cointegration relationship between spot and futures prices. The speculative efficiency hypothesis did not hold even if the joint hypothesis is not rejected because of the existence of serial correlation in the residuals.

Keywords: CO2 emission allowances, Cointegration, Spot and futures prices, Market efficiency

JEL Classification: G13, G14, Q50

Suggested Citation

Darné, Olivier and Fouilloux, Jessica and Charles, Amelie, Testing the Speculative Efficiency Hypothesis on Co2 Emission Allowance Prices: Evidence from Bluenext (May 1, 2011). International Conference of the French Finance Association (AFFI), May 2011, Available at SSRN: https://ssrn.com/abstract=1834350

Olivier Darné

University of Nantes - Faculty of Business and Economics ( email )

Nantes
France

Jessica Fouilloux (Contact Author)

IGR - IAE de Rennes 1 ( email )

7 place Hoche
Rennes, Bretagne 35065
France

Amelie Charles

Audencia Nantes School of Management ( email )

8 route de la Jonelière, BP 31222
Nantes Cedex 3, Cedex 3 44312
France

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