Abstract
This paper applies the Dynamic Conditional Correlation (DCC) model and Iterative Cumulative Sums of Squares (ICSS) model to investigate the volatility spillover effect between carbon emission market and crude oil market. In particular, an effective time-varying correlation analysis method, i.e. DCC, is first conducted to capture the dynamic linkage relationship between the two markets. Then, the ICSS method is used to explore the structural changes of such spillover effect and further identify the impacts of the related events on the linkage mechanism. Using the European Union Allowance (EUA) futures price and Brent crude oil futures price as study samples, some interesting findings can be obtained from the empirical study: (a) there exists an obvious positive relationship between the EUA and Brent markets; (b) such dynamic spillover effect varies with time and becomes somewhat smaller in Phase III than Phase II and (c) economic events (e.g., the financial crises) and political changes would structurally change the dynamic linkage mechanism.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
