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WP-AD 2012-14<br />
Stylized Facts of CO 2<br />
Returns *<br />
Vicente Medina and Ángel Pardo ∗∗<br />
Abstract<br />
The listing of a new asset requires the knowledge of its statistical properties prior to its use for<br />
hedging, speculative or risk management purposes. In this paper, we study the stylized facts of<br />
European Union Allowances (EUAs) returns. The majority of the phenomena observed, such as<br />
heavy tails, volatility clustering, asymmetric volatility and the presence of a high number of<br />
outliers are similar to those observed in both commodity futures and financial assets. However,<br />
properties such as negative asymmetry, positive correlation with stocks indexes and higher<br />
volatility levels during the trading session, typical of financial assets, and the existence of inflation<br />
hedge and positive correlation with bonds, typical of commodity futures, are also detected.<br />
Therefore, our results indicate that EUAs returns do not behave like common commodity futures<br />
or financial assets, and point to the fact that EUAs are a new asset class.<br />
Keywords: European Union Allowances (EUAs), Stylized Fact, Asset Class, Commodity.<br />
JEL classification: G1.<br />
* The authors are grateful for the financial support of the Spanish Ministry of Education and Science (projects ECO2009-<br />
14457-C04-04 and CGL2009-09604), the FEDER, and the Cátedra de Finanzas Internacionales - Banco Santander. We are<br />
indebted to ECX market for providing the database. Usual caveats apply.<br />
∗∗ V. Medina: Universidad de Valencia, email: vicente.medina@uv.es (corresponding author). A. Pardo: Universidad de<br />
Valencia.
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