TITLE:
Analysis and Test of Multifractal Characteristics of the European Carbon Emissions Market—Based on the Framework of Wavelet Leaders
AUTHORS:
Jingli Liang
KEYWORDS:
The European Union Emission Trading Scheme, Wavelet Leaders, Multifractal Analysis
JOURNAL NAME:
Low Carbon Economy,
Vol.7 No.1,
March
25,
2016
ABSTRACT: In order to depict the complex price volatility of carbon emission permits
under the European Union Emission Trading Scheme (EU ETS) accurately, we use the
multifractal analysis based on wavelet leaders to extract the useful information
from the carbon price series in this paper. Firstly, we test the multifractal property
of the EU carbon market, and the empirical results show that the three phases of
the EU ETS have shown significant multifractal characteristics. Compared with the
other two phases, the multifractal characteristics of phase three are the strongest
and the prices are the most uneven. Then, based on the width of the multifractal
spectrum and the variances of the Hausdorff dimension, we innovatively propose an
indicator VhS which has been proved to be effective in depicting the price volatility
of the European carbon market. This paper provides a new train of thought for the
risk identification and management in the multifractal market.