Volatility And Its Policy Effects Of Chinese Low-carbon Index Return

Since the entry into force of the Kyoto Protocol, carbon financial markets began to have the rapid development. The latest forecast shows that the trading volume of global carbon emissions will reach to$3.5trillion by2020, which is perhaps more than the oil market, to become the largest energy trading market. China is the primary supply country in CDM project market,thus our country have huge development potential. Now we’ve already opened a low-carbon pilot of the five provinces and eight cities, dozens of Exchange has built up in succession except for that in Beijing, Tianjin, Shanghai, Shenzhen, which is to help business conduct the CDM project listing as well as attempts to voluntary emissions trading. Perfect for boosting the pricing mechanism of China’s carbon industry, the China Securities Index Co., Ltd., Beijing Environment Exchange, Vantage Point launched the China Low Carbon Index, which has set a benchmark in the capital markets for the booming clean energy and science and technology.In this article we’ve found that China Low Carbon Index has a severe volatility through the brief introduction and analysis of the status quo of China Low Carbon Index. According to China Low Carbon Index return series descriptive statistics and the related test, we found that the return series is stable, there is no correlation, and has zero mean, left-skewed phenomenon,"peak and fat tail" and the presence of ARCH effect and other characteristics. Therefore using the GARCH model to model the return series, found that each model are good fitting,GARCH-M model is superior to the GARCH (1,1) model, and when depicting the sequence of yield on the leverage effect, EGARCH (1,1,1) model is superior to TARCH (1,1,1) model. To explore the cause of the policy reasons for China’s low-carbon index fluctuations, we use fluctuation point identify methods to find unusual fluctuation points in China Low Carbon Index, then looking for the major policy events that may cause unusual fluctuations around the abnormal fluctuation points. At last we use event study method, from the policy event overall and each event two aspects respectively, to study the impact of China’s low-carbon index, it’s certified that the major policy events have a significant impact on China Low Carbon Index, and most of them are negative impact. In the end,we put forward some policy recommendations, according to the volatility characteristics and the effect of policy of China Low Carbon Index.