Research On Information Efficiency Of China’s Carbon Market By Fuzzy Entropy

The environmental problems caused by carbon emissions constrains China’s sustainable development.The carbon market can effectively reduce the society’s overall emission reduction costs and achieve the goal of controlling greenhouse gas emissions,and promote technological progress and industrial structure upgrades.At present,the Chinese government is actively developing their carbon market and started the construction of the national carbon market.It is expected to become the largest carbon market in the world.For emerging carbon financial markets,market information efficiency is a key indicator of market maturity,and it is essential for market participants to formulate trading strategies.Studying the information efficiency of carbon market and its dynamic changes is of great significance and helps us fully understand the development and operation of the carbon market.In this thesis,the fuzzy entropy method is used to measure the information efficiency of China’s carbon emission rights market.Seven carbon provinces and cities in Hubei,Guangdong,Shenzhen,Beijing,Shanghai,Chongqing and Tianjin are selected as research objects.Firstly,this paper uses the BDS test method to test the nonlinear characteristics of the seven pilot carbon markets.The results show that there are significant nonlinear characteristics in the seven pilot carbon markets.Therefore,using the entropy method which can explore non-linear characteristics to study can better explain the market information efficiency than the traditional linear method.Secondly,the fuzzy entropy and information efficiency index were used to study the information efficiency of the seven pilot carbon markets.According to the overall information efficiency of the market,it was ranked as Hubei,Guangdong,Beijing,Shanghai,Shenzhen,Tianjin and Chongqing carbon markets.Kruskal-Wallis test shows that there are significant differences in time-varying information efficiency of seven pilot carbon markets,the market time-varying information efficiency ranking is the same as the overall information efficiency ranking.Moreover,the allowance allocation,transaction rules and the construction of market system may affect the information efficiency of China’s carbon markets.In addition,Chongqing and Hubei,Shenzhen and Tianjin carbon markets have strong positive correlations,while Beijing and Hubei,Beijing and Shanghai,Hubei and Shenzhen carbon markets have strong negative correlations.Finally,this paper summarizes the research on carbon market information efficiency and its relevance.Finally,based on the empirical results,it provides policy recommendations for China’s construction of national unified carbon market from four aspects:improving carbon emission system construction,improving carbon market trading system construction,guiding market micro-subj ect behavior and strengthening carbon financial services.