Information efficiency in the EU ETS during Phase III

Abstract

This study examines the market efficiency of the European Union Emission Trading Scheme (EU ETS). Since 2005 it has seen increased importance and growth in trading volume. The EU ETS is the largest emission trading system by transaction volume and in this study tests if the market exhibits predictability of prices. It tests whether overreaction or momentum exists in the carbon price and if so, whether profitable trading strategies can be employed. The thesis documents short term overreaction and momentum along various time-series within the EUETS. Statistically significant alphas were found in a number of strategies tested. These strategies provide excess returns that remain achievable even after transaction costs have been taken into consideration. The results provide evidence that the EU ETS in Phase III is not informationally efficient.

Date of Award	18 Oct 2022
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Eva Schliephake (Supervisor)