On the High-Frequency Price Reactions of European Union Allowances to News

This thesis addresses the high-frequency price formation in the European Union Emissions Trading Scheme (EU ETS). In particular, it deals with high-frequency price reactions of European Union Allowances (EUAs) to scheduled macroeconomic and regulatory announcements. The work incorporates several important features of high-frequency EUA price data such as intraday seasonalities, persistence in the second conditional moment of EUA returns, the exact arrival point in time of the announcements and most notably market participant's expectations. Chapter 2 introduces the price and the announcement data and describes their main characteristics. Chapter 3 models the high-frequency EUA price reactions to news. Chapter 4 investigates the economic significance of EUA price adjustments to news by calculating the profits of two market participants who trade on macroeconomic and regulatory announcements.