Graduation Year
2019
Date of Submission
12-2018
Document Type
Open Access Senior Thesis
Degree Name
Bachelor of Arts
Department
Economics
Second Department
Mathematics
Reader 1
Mary Evans
Reader 2
Mark Huber
Terms of Use & License Information
Rights Information
@ 2018 James F Keneally
OCLC Record Number
1089197165
Abstract
This thesis attempts to model the returns on Regional Greenhouse Gas Initiative (RGGI) allowances using logged monthly returns from 2011-2018. This asset, shown to be a useful diversifier in portfolios, has been identified by previous literature to behave similarly to commodities. I used auto-regressive, GARCH, and Markov regime switching models to analyze the returns because the returns displayed changing volatility. These models were comparatively analyzed both in and out-of-sample. In this limited data analysis, the Markov model outperformed both alternatives in-sample. The Markov and Garch models displayed similar predictive power out-of-sample, however neither were particularly effective.
Recommended Citation
Keneally, James, "Modeling Returns on Carbon Emission Allowances: An Application to RGGI" (2019). CMC Senior Theses. 2102.
https://scholarship.claremont.edu/cmc_theses/2102
