Abstract
This study provides the first empirical investigation of informational efficiency for the Chicago Climate Exchange. Using daily settlement price and trading volume data for the Carbon Financial Instruments, we conduct a battery of econometric tests in assessing weak-form market efficiency for the Chicago Climate Exchange during its Phases I and II. Results of the empirical tests collectively suggest an absence of weak-form informational efficiency during Phase I, yet signs of improvement in informational efficiency during Phase II. Our results highlight the dual roles of trading activity and government regulation in promoting informationally efficient and well-functioning carbon markets in the United States.
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