Empirical Evidence on Time-Varying Hedging Effectiveness of Emissions Allowances under Departures from the Cost-of-Carry Theory

<table class="table-group" id="tab5"><tr><td><table class="table"><tr><td class="thead-hr" colspan="6"><hr/></td></tr><tr class="thead"><td align="left">Futures </td><td align="center"><span style="width: 17.0375px;"><svg height="15.25" id="M120" style="vertical-align:-3.276pt" version="1.1" viewbox="0 0 17.0375 15.25" width="17.0375" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink">
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<g transform="matrix(.012,-0,0,-.012,10.637,15.187)"><path d="M384 0h-275v27q67 5 81.5 18.5t14.5 68.5v385q0 38 -7.5 47.5t-40.5 10.5l-48 2v24q85 15 178 52v-521q0 -55 14.5 -68.5t82.5 -18.5v-27z" id="x31"></path></g>
</svg></span></td><td align="center"><span style="width: 17.0375px;"><svg height="15.25" id="M121" style="vertical-align:-3.276pt" version="1.1" viewbox="0 0 17.0375 15.25" width="17.0375" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink">
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<g transform="matrix(.012,-0,0,-.012,10.637,15.187)"><path d="M285 378v-2q65 -13 102 -54.5t37 -97.5q0 -57 -30.5 -104.5t-74 -75t-85.5 -42t-72 -14.5q-31 0 -59.5 11t-40.5 23q-19 18 -16 36q1 16 23 33q13 10 24 0q58 -51 124 -51q55 0 88 40t33 112q0 64 -39 96.5t-88 32.5q-29 0 -64 -11l-6 29q77 25 118 57.5t41 84.5
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<g transform="matrix(.012,-0,0,-.012,10.637,15.187)"><path d="M153 550l-26 -186q79 31 111 31q90 0 141.5 -51t51.5 -119q0 -93 -89 -166q-85 -69 -173 -71q-32 0 -61.5 11.5t-41.5 23.5q-18 17 -17 34q2 16 22 33q14 9 26 -1q61 -50 124 -50q60 0 93 43.5t33 104.5q0 69 -41.5 110t-121.5 41q-53 0 -102 -20l38 305h286l6 -8
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</svg></span></td></tr><tr><td class="thead-hr" colspan="6"><hr/></td></tr><tr><td align="left">Hedging effectiveness</td><td align="center">0.9080</td><td align="center">0.9052</td><td align="center">0.8992</td><td align="center">0.8599</td><td align="center">0.8549</td></tr><tr class="table-tr"><td colspan="6"><hr class="tbody-hr"/></td></tr></table></td></tr></table>

Hedging effectiveness estimation of different-maturity futures contracts.

Discrete Dynamics in Nature and Society

tab5

Table 5

Table 5: Empirical Evidence on Time-Varying Hedging Effectiveness of Emissions Allowances under Departures from the Cost-of-Carry Theory 