Multifractal Cross-Correlation Analysis of Carbon Emission Markets Between the European Union and China: A Study Based on the Multifractal Detrended Cross-Correlation Analysis and Empirical Mode Decomposition Multifractal Detrended Cross-Correlation Analysis Methods
Using the multifractal detrended cross-correlation analysis (MF-DCCA) method and the Empirical Mode Decomposition (EMD)-MF-DCCA method, this study quantifies the dynamic interrelation between carbon emission allowance returns in the Chinese and EU markets. The cross-correlation statistics indicate a...
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| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
MDPI AG
2025-05-01
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| Series: | Fractal and Fractional |
| Subjects: | |
| Online Access: | https://www.mdpi.com/2504-3110/9/5/326 |
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| Summary: | Using the multifractal detrended cross-correlation analysis (MF-DCCA) method and the Empirical Mode Decomposition (EMD)-MF-DCCA method, this study quantifies the dynamic interrelation between carbon emission allowance returns in the Chinese and EU markets. The cross-correlation statistics indicate a moderate acceptance of the cross-correlation between the two carbon markets. Applying the MF-DCCA and EMD-MF-DCCA methods to the two markets reveals that their cross-correlation exhibits a power-law nature. Moreover, the apparent persistence of the cross-correlation and notable Hurst index show that the cross-correlation between long-term trends of the returns of the Guangdong and EU carbon emission markets exhibits stronger fractality over the long term, whereas the cross-correlation between the short-term fluctuations of the Hubei and EU carbon emission markets demonstrates stronger fractality. Subsequent investigations show that both fat tails and long memory contribute to the various fractals of the cross-correlation between the returns of the Chinese and EU carbon emission markets, especially for the fractals between the Hubei and EU carbon emission markets. Ultimately, the sliding window analysis demonstrates that national policy, trading activity, and other factors can make the observed multiple fractals more sensitive. The aforementioned findings facilitate an understanding of the current state of the Chinese carbon emission market and inform strategies for its future development. |
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| ISSN: | 2504-3110 |