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Volume 17
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Article

An Endowment Effect Study in the European Union Emission Trading Market based on Trading Price and Price Fluctuation

by
Jiqiang Wang
1,
Fu Gu
2,
Yingpeng Liu
3,
Ying Fan
4 and
Jianfeng Guo
3,*
1
College of Management and Economics, Tianjin University, Tianjin 300072, China
2
Department of Industrial and System Engineering, Zhejiang University, Hangzhou 310027, China
3
Institutes of Science and Development, Chinese Academy of Sciences, Beijing 100190, China
4
School of Economics & Management, Beihang University, Beijing 100191, China
*
Author to whom correspondence should be addressed.
Int. J. Environ. Res. Public Health 2020, 17(9), 3343; https://doi.org/10.3390/ijerph17093343
Submission received: 21 April 2020 / Revised: 4 May 2020 / Accepted: 7 May 2020 / Published: 11 May 2020
(This article belongs to the Section Environment and Applied Ecology)
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Abstract

This paper pioneers to investigate the endowment effect in the European Union mission Trading Scheme (EU ETS) as well as the impacts of trading experience and compliance pressure on the endowment effect. This study is based on the complete transaction records of the market. In the data set, the records of two consecutive reverse transactions from a same emitting company are selected. The lowest price that the buyer is willing to pay (WTP) and the maximum price the seller is willing to accept (WTA) are evaluated by excluding their risk cost that is used to avoid short-term fluctuations in the price. By distinguishing the difference between WTA and WTP, and long-term fluctuations in the prices during the two transactions, the trader’s endowment effect can be quantitively assessed. The results show that the degree of endowment effect of traders follows the trading experience. In addition, since the EU ETS is a cap-and-trade market, the traders face different levels of compliance pressure; when the pressure of the emission companies increases, the degree of endowment effect will also decrease.
Keywords: EU ETS; endowment effect; WTA; WTP EU ETS; endowment effect; WTA; WTP

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MDPI and ACS Style

Wang, J.; Gu, F.; Liu, Y.; Fan, Y.; Guo, J. An Endowment Effect Study in the European Union Emission Trading Market based on Trading Price and Price Fluctuation. Int. J. Environ. Res. Public Health 2020, 17, 3343. https://doi.org/10.3390/ijerph17093343

AMA Style

Wang J, Gu F, Liu Y, Fan Y, Guo J. An Endowment Effect Study in the European Union Emission Trading Market based on Trading Price and Price Fluctuation. International Journal of Environmental Research and Public Health. 2020; 17(9):3343. https://doi.org/10.3390/ijerph17093343

Chicago/Turabian Style

Wang, Jiqiang, Fu Gu, Yingpeng Liu, Ying Fan, and Jianfeng Guo. 2020. "An Endowment Effect Study in the European Union Emission Trading Market based on Trading Price and Price Fluctuation" International Journal of Environmental Research and Public Health 17, no. 9: 3343. https://doi.org/10.3390/ijerph17093343

APA Style

Wang, J., Gu, F., Liu, Y., Fan, Y., & Guo, J. (2020). An Endowment Effect Study in the European Union Emission Trading Market based on Trading Price and Price Fluctuation. International Journal of Environmental Research and Public Health, 17(9), 3343. https://doi.org/10.3390/ijerph17093343

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