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Anticipating correlations between EUAs and CERs : a dynamic conditional correlation GARCH model

dc.contributor.authorChevallier, Julien
HAL ID: 7536
dc.date.accessioned2011-01-12T09:46:57Z
dc.date.available2011-01-12T09:46:57Z
dc.date.issued2011-01-12T09:46:57Z
dc.identifier.urihttps://basepub.dauphine.fr/handle/123456789/5441
dc.language.isoenen
dc.subjectCertified Emissions Reductionsen
dc.subjectEuropean Union Allowancesen
dc.subjectMultiple Equation Modelsen
dc.subjectTime-Series Modelsen
dc.subjecteconometric frameworken
dc.subject.ddc333en
dc.subject.classificationjelQ56en
dc.subject.classificationjelC32en
dc.titleAnticipating correlations between EUAs and CERs : a dynamic conditional correlation GARCH modelen
dc.typeArticle accepté pour publication ou publié
dc.description.abstractenPrevious literature has studied the empirical characteristics of European Union Allowances (EUAs) and Certified Emissions Reductions (CERs) time series by using vector autoregression, impulse response function, and cointegration analysis (Chevallier (2010)). This paper extends the analysis by modelling the interrelationships between EUAs and CERs in a multivariate GARCH econometric framework, so as to reflect the dynamics of the correlations between the variables overtime. Using the DCC MGARCH model by Engle and Sheppard (2001) and Engle (2002) on daily data from March 09, 2007 to January 26, 2010, we confirm the presence of strong ARCH and GARCH effects. Besides, we provide strong empirical evidence of time-varying correlations in the range of [0.01;0.90] between EUAs and CERs that have not been considered by previous studies. Thus, our study shows that the correlations between EUAs and CERs extracted from the DCC MGARCH model appear as a useful tool to comprehend the nature of the interrelationships between these two markets, and to reach optimal risk management, portfolio selection, and hedging as called by Engle (2009).en
dc.relation.isversionofjnlnameEconomics Bulletin
dc.relation.isversionofjnlvol31en
dc.relation.isversionofjnlissue1en
dc.relation.isversionofjnldate2011-01
dc.relation.isversionofjnlpages255-272en
dc.description.sponsorshipprivateouien
dc.relation.isversionofjnlpublisherEconomics Bulletinen
dc.subject.ddclabelEconomie de la terre et des ressources naturellesen


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