Liquidity spillover from carbon emission trading markets to stock markets in China

Yang, Xinyuan; Zhu, Jingyao; Xie, Hantao; Zhang, Jianing

doi:10.21511/imfi.20(4).2023.19

Cited by 3 publications

(2 citation statements)

References 58 publications

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“…Zhang and Zhang (2023) disclosed R 2 between 0.003 and 0.009 in their analysis linking individual stock returns to carbon price returns. Likewise, Yang et al (2023) presented an adjusted R 2 of 0.037 when examining liquidity spillover from carbon to stock markets. Tian et al (2016) reported an R 2 of 0.055 in their study correlating individual stock returns with European carbon returns.…”

Section: Baseline Regressionsmentioning

confidence: 99%

Volatility Spillover from Carbon Prices to Stock Prices: Evidence from China’s Carbon Emission Trading Markets

Ma,

Feng,

Chen

et al. 2024

JRFM

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The carbon emission trading markets represent an emerging domain within China. The primary objective of this study is to explore whether carbon price volatility influences stock market volatility among companies subject to these emission trading regulations. Employing daily returns data from 293 publicly traded companies regulated by these emission trading markets, this study encompasses the national carbon market and eight pilot regional carbon markets spanning from August 2013 to October 2023. The results demonstrate that volatility in regional carbon prices positively impacts the stock volatility of companies in the corresponding emission trading region, indicating a volatility spillover effect. Moreover, this spillover effect is more pronounced in sectors marked by lesser carbon intensity than those with greater carbon intensity. The volatility transmission is more pronounced in coastal areas than in inland regions. However, no notable distinctions in volatility transmission are discerned between the periods before and throughout the COVID-19 pandemic. Vector autoregression analyses substantiate that lagged carbon price fluctuations possess limited predictive capacity for contemporaneous equity market volatility and vice versa. The robustness of these outcomes is fortified by applying the E-GARCH model, which accounts for the volatility clustering phenomenon. As the first investigation into the volatility spillover effect between China’s emission trading market and corresponding stock markets, this study offers valuable insights into the investment strategies of retail investors, the formulation of carbon regulations by policymakers, and the carbon emission strategies of corporate managers.

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Section: Baseline Regressionsmentioning

confidence: 99%

Volatility Spillover from Carbon Prices to Stock Prices: Evidence from China’s Carbon Emission Trading Markets

Ma,

Feng,

Chen

et al. 2024

JRFM

Self Cite

View full text Add to dashboard Cite

show abstract

“…Using a variety of techniques, empirical research has also looked at the link between monhttp://dx.doi.org/10.21511/bbs.19 (1).2024.07 etary stability and CBI. A widely used approach is the Vector Autoregression (VAR) method (Zhuravka et al, 2023;Yang et al, 2023;Le et al, 2023;Seyfullayev, 2023). For instance, Riaz and Ramakrishnan's study examines the relationship between Pakistan's monetary stability and CBI.…”

Section: Literature Reviewmentioning

confidence: 99%

The relationship between monetary stability and central bank independence: The case of Azerbaijan

Tanriverdi,

Jabiyev,

Bilan

et al. 2024

Banks and Bank Systems

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The independence of the central bank is one of the most important factors for effective monetary policy. Central bank independence is closely related to monetary stability, which is an important part of monetary policy. In this study, the purpose of the analysis is to understand whether monetary stability functions effectively for central bank independence in Azerbaijan using the vector autoregression method. In addition, the Granger Causality test was conducted to empirically investigate how central bank independence affects the provision of monetary stability in the economy of Azerbaijan over the data period from 1996 to 2022. In this framework, indices or variables are the exchange rate stability index (ERS) in 1996–2022, the level of monetary independence index (MI) in 1996–2020, taken from the “trilemma indexes”, which are defined as the consumer price index (CPI) in 1996–2022, and the broad money supply (M2) in 1996–2022. The findings of the study show that the independence of the central bank has a positive effect on the monetary stability of the Azerbaijani economy.

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The impact of investor sentiment on stock liquidity of listed companies in China

Xu,

Xue,

Zhang

2024

Investment Management and Financial Innovations

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Researchers have scrutinized the link between investor sentiment and stock market liquidity globally, yet few have delved into this dynamic in emerging markets, especially China. Utilizing a sample of 1,839 publicly listed companies in China from 2010 to 2019, this study applies firm- and year-fixed-effects models to explore the nexus between investor sentiment and stock illiquidity, employing the Amihud measure for stock illiquidity assessment. The outcomes of these fixed-effect regressions illustrate a significantly positive relationship between investor sentiment and stock liquidity in the Chinese market. The positive link is more evident in scenarios characterized by high firm leverage, rapid revenue growth, larger corporations, greater institutional ownership, higher stock volatility, and lower book-to-market ratios. Intriguingly, this analysis incorporates the quadratic term of investor sentiment to examine the potential for a nonlinear dynamic between stock illiquidity and investor sentiment. The findings elucidate that the effect of investor sentiment on stock liquidity diminishes at elevated levels of sentiment, revealing a nonlinear inverse U-shaped relationship. The positive correlation between investor sentiment and stock liquidity persists across the three divisions of the Chinese Shenzhen Stock Exchange and remains robust using alternative liquidity measures, such as Roll’s impact and zeros impact. Addressing causality concerns, current investor sentiment appears to influence subsequent liquidity levels. These results provide valuable perspectives for policymakers, business executives, and investors in the stock market. Acknowledgment This research was funded by the Department of Education of Zhejiang Province General Program [Y202353438], the Wenzhou Association for Science and Technology—Service and Technology Innovation Program [jczc0254], the Wenzhou-Kean University Student Partnering with Faculty Research Program [WKUSPF2023004], and the Wenzhou-Kean University International Collaborative Research Program [ICRP2023002].

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Liquidity spillover from carbon emission trading markets to stock markets in China

Cited by 3 publications

References 58 publications

Volatility Spillover from Carbon Prices to Stock Prices: Evidence from China’s Carbon Emission Trading Markets

Volatility Spillover from Carbon Prices to Stock Prices: Evidence from China’s Carbon Emission Trading Markets

The relationship between monetary stability and central bank independence: The case of Azerbaijan

The impact of investor sentiment on stock liquidity of listed companies in China

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