Dynamics of Connectedness in Clean Energy Stocks

Abstract

This paper examines the dynamics of connectedness among the realized volatility indices of 16 clean energy stocks belonging to the SPGCE and the implied volatility indices of two important stock markets—the S&P 500 and the STOXX50—and two commodities markets—the crude oil and gold markets. The empirical results show a unidirectional connectedness from the implied volatility indices to the clean energy stocks. Our analysis further reveals similar volatility connectedness behaviors among companies in the same energy production subsector. However, there exists heterogeneous behavior between different energy production subsectors over time. Further, we identify pairwise directional connectedness clusters among related companies, indicating that there are few possibilities for portfolio diversification within the energy production subsectors. Finally, through an impulse–response analysis, we confirm that the expectation of future market volatility of the S&P 500 index and the gold price plays a leading role in volatility connectedness with clean energy stocks.

Co-movement between oil price,CO2emission,renewable energy and energy equities: Evidence from GCC countries

“…Most recent studies concentrated on the direct relationship between oil price changes and clean energy stock indices (Yu-Ling Hsiao et al, 2019;Dominioni et al, 2019;Fuentes and Herrera, 2020;Lv et al, 2021;Di Febo et al, 2021;Dawar et al, 2021;Ghabri et al, 2021). Most of these works found a significant oil price spillover effect on clean energy stock prices.…”

Hedging strategies among financial markets: the case of green and brown assets

“…A strand of the literature has argued that the green/brown compartmentalization for a class of assets is not homogenous (e.g., see Fuentes and Herrera 2020 ; Kuang 2021a , b ). As such, there is the possibility that this classification might have implications for empirical analyses.…”

Spillover effects in Chinese carbon, energy and financial markets

“…An interesting extension of our work would be to study different clean energy markets. The literature (Fuentes & Herrera, 2020;Pham, 2019) has confirmed that different clean energy markets have heterogeneous spillovers to other markets. In addition, future research could examine the tail spillover among markets instead of the average spillover.…”