Price Discovery and Trading after Hours: New Evidence from the World's Largest Carbon Exchange

International Journal of the Economics of Business

Volumn 20, Issue 3, 2013, Pages 421-445

  Ibikunle, Gbenga ^a   Gregoriou, Andros ^b   Pandit, Naresh R ^a  

^a UNIVERSITY OF EAST ANGLIA   (United Kingdom)

^b UNIVERSITY OF HULL   (United Kingdom)

Author keywords

Carbon Futures; Climate Change Policy; Information Asymmetry; Informational Efficiency; Price Discovery; Transaction Costs

Indexed keywords

EID: 84889085153     PISSN: 13571516     EISSN: 14661829     Source Type: Journal    
DOI: 10.1080/13571516.2013.782986     Document Type: Article

References (57)

1. Aitken, Michael, and Alex Frino. 1996. "The Accuracy of the Tick Test: Evidence from the Australian Stock Exchange." Journal of Banking and Finance 20(10): 1715-1729.
2. Barclay, Michael J., and Terrence Hendershott. 2003. "Price Discovery and Trading after Hours." Review of Financial Studies 16(4): 1041-1073.
3. Barclay, Michael J., and Terrence Hendershott. 2004. "Liquidity Externalities and Adverse Selection: Evidence from Trading after Hours." The Journal of Finance 59(2): 681-710.
4. Barclay, Michael J., Robert H. Litzenberger, and Jerold B. Warner. 1990. "Private Information, Trading Volume, and Stock-Return Variances." The Review of Financial Studies 3(2): 233-253.
5. Barclay, Michael J., and Jerold B. Warner. 1993. "Stealth Trading and Volatility: Which Trades Move Prices?" Journal of Financial Economics 34(3): 281-305.
6. 2 Futures Market: An Intraday Analysis. Working Paper, Bonn Graduate School of Economics.
7. Biais, Bruno, Pierre Hillion, and Chester Spatt. 1999. "Price Discovery and Learning during the Preopening Period in the Paris Bourse." The Journal of Political Economy 107(6): 1218-1248.
8. Brock, William A., and Allan W. Kleidon. 1992. "Periodic Market Closure and Trading Volume: A Model of Intraday Bids and Asks." Journal of Economic Dynamics and Control 16(3-4): 451-489.
9. Cao, Charles, Eric Ghysels, and Frank Hatheway. 2000. "Price Discovery without Trading: Evidence from the NASDAQ Preopening." The Journal of Finance 55(3): 1339-1365.
10. Cason, Timothy N., and Lata Gangadharan. 2011. "Price Discovery and Intermediation in Linked Emissions Trading Markets: A Laboratory Study." Ecological Economics 70(7): 1424-1433.
11. Chan, Kalok, Y. P. Chung, and Herb Johnson. 1995a. "The Intraday Behavior of Bid-Ask Spreads for NYSE Stocks and CBOE Options." The Journal of Financial and Quantitative Analysis 30(3): 329-346.
12. Chan, K. C., William G. Christie, and Paul H. Schultz. 1995b. "Market Structure and the Intraday Pattern of Bid-Ask Spreads for NASDAQ Securities." The Journal of Business 68(1): 35-60.
13. Ciccotello, Conrad S., and Frank M. Hatheway. 2000. "Indicating Ahead: Best Execution and the NASDAQ Preopening." Journal of Financial Intermediation 9(2): 184-212.
14. Clarke, Jonathan, and Shastri Kuldreep. 2000. On Information Asymmetry Metrics. Working Paper, SSRN eLibrary.
15. Convery, Frank J. 2009. "Reflections - The Emerging Literature on Emissions Trading in Europe." Review of Environmental Economics and Policy 3(1): 121-137.
16. 2 Trading Market in Europe: A Financial Perspective." In Financial Aspects in Energy: A European Perspective, edited by A. Dorsman, W. Westerman, M. B. Karan and Ö. Arslan, 51-67. Berlin: Springer.
17. 2 Emission Allowance Prices and Derivatives: Evidence from the European Trading Scheme." Journal of Banking and Finance 33(7): 1230-1241.
18. Davies, Ryan J. 2003. "The Toronto Stock Exchange Preopening Session." Journal of Financial Markets 6(4): 491-516.
19. Easley, David, Nicholas M. Kiefer, and Maureen O'Hara. 1996. "Cream-Skimming or Profit-Sharing? The Curious Role of Purchased Order Flow." The Journal of Finance 51(3): 811-833.
20. Easley, David, Nicholas M. Kiefer, and Maureen O'Hara. 1997. "One Day in the Life of a Very Common Stock." The Review of Financial Studies 10(3): 805-835.
21. Easley, David, and Maureen O'Hara. 1992. "Time and the Process of Security Price Adjustment." The Journal of Finance 47(2): 577-605.
22. Fama, Eugene F., and James D. Macbeth. 1973. "Risk, Return, and Equilibrium: Empirical Tests." The Journal of Political Economy 81(3): 607-636.
23. Flood, Mark D., Ronald Huisman, Kees G. Koedijk, and Ronald J. Mahieu. 1999. "Quote Disclosure and Price Discovery in Multiple-Dealer Financial Markets." The Review of Financial Studies 12(1): 37-59.
24. Foster, F. D., and S. Viswanathan. 1990. "A Theory of the Interday Variations in Volume, Variance, and Trading Costs in Securities Markets." The Review of Financial Studies 3(4): 593-624.
25. French, Kenneth R., and Richard Roll. 1986. "Stock Return Variances: The Arrival of Information and the Reaction of Traders." Journal of Financial Economics 17(1): 5-26.
26. Frino, Alex, Jennifer Kruk, and Andrew Lepone. 2010. "Liquidity and Transaction Costs in the European Carbon Futures Market." Journal of Derivatives and Hedge Funds 16(2): 100-115.
27. George, Thomas, Gautham Kaul, and M. Nimalendran. 1991. "Estimation of the Bid-Ask Spread and its Components: A New Approach." Review of Financial Studies 4(4): 623-656.
28. Glosten, Lawrence R., and Lawrence E. Harris. 1988. "Estimating the Components of the Bid/Ask Spread." Journal of Financial Economics 21(1): 123-142.
29. Greene, Jason T., and Susan G. Watts. 1996. "Price Discovery on the NYSE and the NASDAQ: The Case of Overnight and Daytime News Releases." Financial Management 25: 19-42.
30. Gwilym, Owain, Mark Buckle, and Stephen Thomas. 1997. "The Intraday Behaviour of Bid-Ask Spreads, Returns and Volatility for FTSE 100 Stock Index Options." Journal of Derivatives 4: 20-32.
31. He, Yan, Hai Lin, Junbo Wang, and Chunchi Wu. 2009. "Price Discovery in the Round-the-Clock US Treasury Market." Journal of Financial Intermediation 18: 464-490.
32. Heflin, Frank, and Kenneth W. Shaw. 2000. "Blockholder Ownership and Market Liquidity." The Journal of Financial and Quantitative Analysis 35: 621-633.
33. Ho, Thomas S. Y., and Hans R. Stoll. 1983. "The Dynamics of Dealer Markets under Competition." The Journal of Finance 38: 1053-1074.
34. Huang, Roger D., and Hans R. Stoll. 1997. "The Components of the Bid-Ask Spread: A General Approach." The Review of Financial Studies 10: 995-1034.
35. Ibikunle, Gbenga, Andros Gregoriou, and Naresh Pandit. 2011. European Union Emissions Trading Scheme (EU-ETS) Futures Liquidity Effects: Evidence from the European Energy Exchange (EEX), 8th International Conference on Advances in Applied Financial Economics. Greece: Samos Island Research and Training Institute of East Aegean.
36. Jiang, Christine X., Tanakorn Likitapiwat, and Thomas H. Mcinish. 2012. "Information Content of Earnings Announcements: Evidence from after Hours Trading." Journal of Financial and Quantitative Analysis 47(6): 1303.
37. Joyeux, Roselyne, and George Milunovich. 2010. "Testing Market Efficiency in the EU Carbon Futures Market." Applied Financial Economics 20: 803-809.
38. Kim, Minho, Andrew C. Szakmary, and Thomas V. Schwarz. 1999. "Trading Costs and Price Discovery across Stock Index Futures and Cash Markets." Journal of Futures Markets 19: 475-498.
39. Kossoy, Alexandre, and Phillipe Ambrosi. 2010. State and Trends of the Carbon Markets 2010. Washington, DC: World Bank Report.
40. Kurov, Alexander. 2008. "Information and Noise in Financial Markets: Evidence from the E-Mini Index Futures." Journal of Financial Research 31: 247-270.
41. Kyle, Albert S. 1985. "Continuous Auctions and Insider Trading." Econometrica 53: 1315-1335.
42. Lee, Charles M., and Mark J. Ready. 1991. "Inferring Trade Direction from Intraday Data." The Journal of Finance 46: 733-746.
43. Lin, Ji-Chai, Gary C. Sanger, and G. G. Booth. 1995. "Trade Size and Components of the Bid-Ask Spread." The Review of Financial Studies 8: 1153-1183.
44. Linacre, Nicholas, Alexandre Kossoy, and Phillipe Ambrosi. 2011. State and Trends of the Carbon Market 2011. Washington, DC: World Bank Report.
45. Madhavan, Ananth, and Venkatesh Panchapagesan. 2000. "Price Discovery in Auction Markets: A Look inside the Black Box." The Review of Financial Studies 13: 627-658.
46. Madhavan, Ananth, Matthew Richardson, and Mark Roomans. 1997. "Why Do Security Prices Change? A Transaction-Level Analysis of NYSE Stocks." The Review of Financial Studies 10: 1035-1064.
47. Mizrach, Bruce, and Yoichi, Otsubo. 2011. The Market Microstructure of the European Climate Exchange. Working Paper, SSRN eLibrary.
48. Montagnoli, Alberto, De Vries, and P. Frans. 2010. "Carbon Trading Thickness and Market Efficiency." Energy Economics 32: 1331-1336.
49. Newey, Whitney K., and Kenneth D. West. 1987. "A Simple, Positive Semi-Definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix." Econometrica 55: 703-708.
50. Pascual, Roberto, Alvaro Escribano, and Mikel Tapia. 2004. "Adverse Selection Costs, Trading Activity and Price Discovery in the NYSE: An Empirical Analysis." Journal of Banking and Finance 28: 107-128.
51. Porter, David C., and Daniel G. Weaver. 1998. "Post-Trade Transparency on NASDAQ's National Market System." Journal of Financial Economics 50: 231-252.
52. Rittler, Daniel. 2011. "Price Discovery and Volatility Spillovers in the European Union Emissions Trading Scheme: A High-Frequency Analysis." Journal of Banking and Finance. 36 (3): 774-785.
53. Stoll, Hans R., and Robert E. Whaley. 1990. "Stock Market Structure and Volatility." The Review of Financial Studies 3: 37-71.
54. Uhrig-Homburg, Marliese, and Michael Wagner. 2007. "Derivative Instruments in the EU Emissions Trading Scheme - An Early Market Perspective." Energy and Environment 19: 1-26.
55. 2 Emission Allowances: An Empirical Analysis of the Trial Period." Journal of Derivatives 17: 73-88.
56. Van Bommel, Jos. 2011. "Measuring Price Discovery: The Variance Ratio, the R2 and the Weighted Price Contribution." Finance Research Letters 8: 112-119.
57. Ness, Van, F. Bonnie, Van Ness, A. Robert, and Richard S. Warr. 2001. "How Well Do Adverse Selection Components Measure Adverse Selection?" Financial Management 30: 77-98.