Carbon emission trading and equity markets in China

How liquidity is impacting carbon returns

Bibliographic Data

ID15066570
AuthorsJunchao Zhang (0000-0003-2243-0012, Zhengzhou Business University, Gongyi, Henan, China), Wei Han (0000-0001-9678-3190, Zhengzhou Business University, Gongyi, Henan, China, corresponding author)
Year2022
Volume35
Issue1
Pages6466-6478
Publication date2022-12-31
Open AccessYes
TypeARTICLE
VenueEconomic Research-Ekonomska Istraživanja (JOURNAL)
Journal identifiersISSN: 1331-677X • E-ISSN: 1848-9664
PublisherInforma UK Limited (PUBLISHER • GB)
DOI10.1080/1331677x.2022.2049010
OpenAlexW4220870334
LanguageEN
Citations received1
References cited48

This paper aims to investigate the impact of liquidity on the return dynamics between the carbon emission trading market and the stock market in China from 2013 to 2021. In the carbon emission trading market, we find that liquidity on any given day can significantly predict the cross-section returns the next day. Furthermore, we examine the spillover effect between the two markets and find the carbon market has a greater impact on the stock market. We also find evidence that stock market liquidity can significantly improve the liquidity of the carbon market. Finally, we observe that the volatility in the stock market not only deteriorates the liquidity of the stock market but also the carbon market, where the impact for the latter is from decreasing trading volume and increasing prices

Business · Carbon fibers · Carbon market · China · Economics · Emissions trading · Financial economics · Geography · Greenhouse gas · Market liquidity · Monetary economics · Climate Change Policy and Economics · Financial Markets and Investment Strategies · Market Dynamics and Volatility · Materials Science

Tools

Open DOIOpen Access