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

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Terms of Use for work posted in Scholarship@Claremont.

Rights Information

@ 2018 James F Keneally

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.

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