Research On The Effectiveness And Volatility Forecast Of Carbon Market In China

Climate change has become an indisputable fact,not only directly affecting the survival of animals and plants in the natural world,but also poses a great threat to human society through direct and indirect ways.Carbon dioxide emissions are the 'main culprit' of climate change.Therefore,controlling carbon dioxide emissions is an important way to alleviate climate change.The establishment of carbon market has a positive effect on controlling carbon emission,which can fully mobilize the enthusiasm of market emission reduction and obtain the maximum social benefits.In the carbon market trading,carbon price,as an open resource,contains a large amount of information that can be mined,and the transmission of these information depends on whether the market is effective,so it is very important to study the effectiveness of carbon market.In addition,the volatility of carbon price has great risks.In addition,the formation of financial option price requires the expected estimation of volatility,so it is necessary to predict the volatility of carbon market.The traditional effective market hypothesis cannot explain the various anomalies in the financial market.There are some shortcomings in the linear analysis paradigm based on the effective market hypothesis.The fractal market hypothesis breaks the inherent research thinking and makes the financial research step up a new stage.Based on the effective market hypothesis,this paper analyzes the multifractal characteristics of eight carbon markets in China by using EMD-MFDFA,and describes the effectiveness of carbon market by using multifractal parameters,and describes the evolution characteristics of market effectiveness by using sliding window technology.In order to improve the prediction accuracy of carbon market volatility,this paper applies MSM model to volatility prediction based on fractal theory,and compares it with GARCH model in short and long-term prediction.The main innovations of this paper are as follows:(1)Based on multifractal theory,the multifractal characteristics of the yield of carbon price in eight carbon markets in China are analyzed by EMD-MFDFA.The sources of multifractal features are discussed,the dynamic evolution of the effectiveness of carbon market is measured,and the research work makes up for the lack of dynamic perspective in measuring carbon market efficiency.At the method level,EMD-MFDFA is used to avoid the error caused by polynomial fitting,and the original sequence is randomized by introducing TFTS to overcome the defects of traditional Fourier transform;at the application level,the multifractal characteristics of China carbon markets are analyzed,and the dynamic evolution of carbon market effectiveness is explored,which provides theoretical support for risk management of carbon market.(2)The volatility of eight carbon markets in China is predicted by using MSM model.The method can describe the volatility characteristics of financial asset return under non-stationary conditions.Compared with GARCH model,it is found that MSM model can better predict the volatility of carbon market than GARCH model.Therefore,this paper proposes a more accurate model for China's carbon trading market volatility prediction.The paper draws some conclusions:(1)When using multifractal method to eliminate the trend of fluctuation,the selection of eliminating trend function has a more important influence on the empirical results.The polynomial fitting method used by traditional MFDFA method ignores the detailed information;(2)The carbon price return rate of eight carbon markets has multifractal characteristics;(3)The multifractal characteristics of carbon price return in Shenzhen?Chongqing and Fujian are caused by the long-term memory of volatility;while these in Shanghai,Beijing,Tianjin and Hubei are mainly due to the influence of thick tail,and the long-term memory also has some influence;(4)MSM model is more effective than EGARCH model in predicting the volatility of China.(5)Proposed measures to improve the effectiveness of the carbon market from the perspective of policy guarantees,financial innovation,and regional differences,and consider carbon market risk prevention countermeasures from three aspects:market regulation mechanism,CCER market,and carbon asset management.