Can stock market investors hedge energy risk? Evidence from Asia

Batten, Jonathan A.; Kinateder, Harald; Szilagyi, Peter G.; Wagner, Niklas

doi:10.1016/j.eneco.2016.11.026

Cited by 70 publications

(36 citation statements)

References 80 publications

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“…There is a large literature on the relationships between dirty energy prices, especially crude oil prices, and stock market indices (see, among others [21][22][23]), with some evidence on the ability of crude oil prices to hedge the downside risk of stock market indices [20,[24][25][26]. However, less evidence exists on the hedging abilities of green bonds and clean energy stocks against dirty energy investments and the portfolio implications in term of hedge ratios, hedging effectiveness, and the drivers of the hedge portfolio returns.…”

Section: Related Studiesmentioning

confidence: 99%

Hedging Strategies of Green Assets against Dirty Energy Assets

2020

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Previous studies argue that the relationships between clean/green and dirty energy assets are time-varying, but there is a lack of evidence on the hedging ability of clean energy stocks and green bonds for dirty assets, such as crude oil and an energy stock index exchange traded fund (ETF), and the portfolio implications. Furthermore, potential drivers of the dynamics of the hedge portfolio returns are still unknown. To address these research gaps, the authors provide an extensive analysis of the hedging ability of clean/green assets against two dirty energy assets (crude oil prices and energy ETF) using daily data from 3 January 2012 to 29 November 2019. Using corrected dynamic conditional correlation models, the authors model correlation and then compute hedge ratios and hedging effectiveness, which all seem to vary with time. The results from hedging effectiveness indicate that investors should follow a dynamic hedging strategy and that clean energy stocks are more effective hedge than green bonds, especially for crude oil. The application of regression analyses shows that the implied volatilities of US equities and crude oil as well as US dollar index have a negative impact on the hedge portfolio returns, whereas gold prices and inflation have a positive impact.

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Section: Related Studiesmentioning

confidence: 99%

Hedging Strategies of Green Assets against Dirty Energy Assets

2020

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“…In general, a large number of scientific works are devoted to the issue of risk assessment and risk management in energy resource markets. In these works, the nature of these risks is considered [77,78], the regularities of their influence on the activity of enterprises are analyzed [79,80], the methods of estimation and management of this type of economic risks are justified [81,82]. We should also pay attention to the existence of close connection between the issues of minimizing energy risks and the problem of ensuring energy security and energy independence of countries [83].…”

Section: Literature Reviewmentioning

confidence: 99%

Evaluation of the Adaptability of the Ukrainian Economy to Changes in Prices for Energy Carriers and to Energy Market Risks

et al. 2018

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The methodological framework for assessing adaptability of the economy to changes in energy prices and risks to energy markets was developed. The study proposes indicators for assessing the level of adaptability of the economic sectors to changes in prices for energy carriers and to risks of energy markets. The model of decomposition of adaptability level of the economy sectors to changes in energy prices has been developed. The theoretical and empirical analysis of the influence of energy prices on adaptability level of enterprises and households is carried out. Based on the empirical analysis, it was found that adaptability level of the sectors of Ukrainian economy significantly differs both in the years of the investigated period and in sectors of the economy. At the same time, most indicators of the level of adaptability vary from 0.4 to 0.7. Consequently, the actual decline in the profit of enterprises was 40–70% lower than the potentially possible decrease in the profit of these enterprises due to the prices rising for energy carriers. Moreover sectors which are less vulnerable to the growth of prices show higher adaptability level.The possibility of using the obtained results in developing a state energy saving strategy is substantiated.

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“…Despite similar import and consumption patterns to oil, there has been limited studies connecting China's stock returns to thermal coal or natural gas prices. Batten, Kinateder, Szilagyi, and Wagner (), for example, highlights the importance of considering oil, gas, and coal prices as an energy portfolio (see also Börger, Cartea, Kiesel, & Schindlmayr, ) when considering a hedging tool for portfolio management in Asia. The authors suggest that when energy portfolio risk is decomposed into its individual components, coal and gas offer may offer better hedging possibilities for the Asian region compared to oil as there is strong dependence for coal as an energy fuel.…”

Section: Introductionmentioning

confidence: 99%

Impact of international energy prices on China's industries

Wong

Zhang

2020

Journal of Futures Markets

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This study examines how returns and volatility of future contracts for Brent crude oil (Brent), West Texas Intermediate crude oil (WTI), Henry Hub natural gas, and Newcastle thermal coal impacts industries in China. Using the firm‐level data of 3,750 stock listings across both Shanghai and Shenzhen stock exchanges, segregated into 138 subindustries under the Global Industry Classification Standard, this study finds evidence that crude oil futures have the most significant influence. Further analysis suggests that stock returns of oil‐related companies are more closely align to Brent and WTI's futures returns following China's key oil pricing reform on March 27, 2013. Overall, Chinese industries are also more exposed to global crude oil futures volatility after this event.

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Can stock market investors hedge energy risk? Evidence from Asia

Cited by 70 publications

References 80 publications

Hedging Strategies of Green Assets against Dirty Energy Assets

Hedging Strategies of Green Assets against Dirty Energy Assets

Evaluation of the Adaptability of the Ukrainian Economy to Changes in Prices for Energy Carriers and to Energy Market Risks

Impact of international energy prices on China's industries

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