It is premature to include non-CO2 effects of aviation in emission trading schemes

The recent G8 Gleneagles climate statement signed on 8 July 2005 specifically mentions a determination to lessen the impact of aviation on climate [Gleneagles, 2005. The Gleneagles communique: climate change, energy and sustainable development. http://www.fco.gov.uk/Files/kfile/PostG8_Gleneagles_Communique.pdf]. In January 2005 the European Union Emission Trading Scheme (ETS) commenced operation as the largest multi-country, multi-sector ETS in the world, albeit currently limited only to CO2 emissions. At present the scheme makes no provision for aircraft emissions. However, the UK Government would like to see aircraft included in the ETS and plans to use its Presidencies of both the EU and G8 in 2005 to implement these schemes within the EU and perhaps internationally. Non-CO2 effects have been included in some policy-orientated studies of the impact of aviation but we argue that the inclusion of such effects in any such ETS scheme is premature; we specifically argue that use of the Radiative Forcing Index for comparing emissions from different sources is inappropriate and that there is currently no metric for such a purpose that is likely to enable their inclusion in the near future. (c) 2005 Elsevier Ltd. All rights reserved.

Hitting emissions targets with (statistical) confidence in multi-instrument Emissions Trading Schemes

A means of assessing, monitoring and controlling aggregate emissions from multi-instrument Emissions Trading Schemes is proposed. The approach allows contributions from different instruments with different forms of emissions targets to be integrated. Where Emissions Trading Schemes are helping meet specific national targets, the approach allows the entry requirements of new participants to be calculated and set at a level that will achieve these targets. The approach is multi-levelled, and may be extended downwards to support pooling of participants within instruments, or upwards to embed Emissions Trading Schemes within a wider suite of policies and measures with hard and soft targets. Aggregate emissions from each instrument are treated stochastically. Emissions from the scheme as a whole are then the joint probability distribution formed by integrating the emissions from its instruments. Because a Bayesian approach is adopted, qualitative and semi-qualitative data from expert opinion can be used where quantitative data is not currently available, or is incomplete. This approach helps government retain sufficient control over emissions trading scheme targets to allow them to meet their emissions reduction obligations, while minimising the need for retrospectively adjusting existing participants’ conditions of entry. This maintains participant confidence, while providing the necessary policy levers for good governance.

An examination of the complementary volume–volatility information theories

The volume–volatility relationship during the dissemination stages of information flow is examined by analyzing various theories relating volume and volatility as complementary rather than competing models. The mixture of distributions hypothesis, sequential arrival of information hypothesis, the dispersion of beliefs hypothesis, and the noise trader hypothesis all add to the understanding of how volume and volatility interact for different types of futures traders. An integrated picture of the volume–volatility relationship is provided by investigating the dynamic linear and nonlinear associations between volatility and the volume of informed (institutional) and uninformed (the general public) traders. In particular, the trading behavior explanation for the persistence of futures volatility, the effect of the timing of private information arrival, and the response of institutional traders to excess noise trading risk is examined

The Clean Development Mechanism as ethical development? Reconciling emissions trading and local development

This paper examines the ethics of the Clean Development Mechanism (CDM) in its architecture, processes and outcomes and its potential to allocate resources to the poor as ‘ethical development’. Two specific examples of CDM projects help us to explore some of the quandaries that seem to be quickly defining operating procedure for the CDM in its efforts to bring entitlementsto the poor. The paper concludes with reflections on the normative and social complications of the CDM and closes with three key areas of further investigation.

Permanent trading impacts and bond yields

We analyze four years of transaction data for euro-area sovereign bonds traded on the MTS electronic platforms. In order to measure the informational content of trading activity, we estimate the permanent price response to trades. We find not only strong evidence of information asymmetry in sovereign bond markets, but we also show the relevance of information asymmetry in explaining the cross-sectional variations of bond yields across a wide range of bond maturities and countries. Our results confirm that trades of more recently issued bonds and longer maturity bonds have a greater permanent effect on prices. We compare the price impact of trades for bonds across different maturity categories and find that trades of French and German bonds have the highest long-term price impact in the short maturity class whereas trades of German bonds have the highest permanent price impacts in the long maturity class. More importantly, we study the cross-section of bond yields and find that after controlling for conventional factors, investors demand higher yields for bonds with larger permanent trading impact. Interestingly, when investors face increased market uncertainty, they require even higher compensation for information asymmetry.

Real estate mutual funds: herding, momentum-trading and performance

This study jointly examines herding, momentum trading and performance in real estate mutual funds (REMFs). We do this using trading and performance data for 159 REMFs across the period 1998–2008. In support of the view that Real Estate Investment Trust (REIT) stocks are relatively more transparent, we find that stock herding by REMFs is lower in REIT stocks than other stock. Herding behavior in our data reveals a tendency for managers to sell winners, reflective of the “disposition effect.” We find low overall levels of REMF momentum trading, but further evidence of the disposition effect when momentum trading is segregated into buy–sell dimensions. We test the robustness of our analysis using style analysis, and by reference to the level of fund dividend distribution. Our results for this are consistent with our conjecture about the role of transparency in herding, but they provide no new insights in relation to the momentum-trading dimensions of our analysis. Summarizing what are complex interrelationships, we find that neither herding nor momentum trading are demonstrably superior investment strategies for REMFs.