The impact of economic policy uncertainties on the volatility of European carbon market

Dai, Peng‐Fei; Xiong, Xiong; Huynh, Toan Luu Duc; Wang, Jiqiang

doi:10.1016/j.jcomm.2021.100208

Cited by 27 publications

(10 citation statements)

References 44 publications

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“…, 2021a, b). Moreover, macroeconomic variables and global economic policy information can exert an effect on the European market and the return on volatility (Dai et al. , 2021a, b; Wang et al.…”

Section: Discussionmentioning

confidence: 99%

“…The dual economic and financial nature of the crisis generated major general uncertainty. Indeed, the effect of the COVID-19 crisis on investors' confidence was more notable in the equity segment (Shaikh and Huynh, 2021), increasing the risk of stock markets (Dai et al. , 2021a, b).…”

Section: Literature Reviewmentioning

confidence: 99%

“…, 2021). In this vein, the short- and long-term volatility of spot returns are connected to the uncertainty of European economic policy, since external policy uncertainty affects the volatility of the European market ((Dai et al. , 2021a, b).…”

Section: Literature Reviewmentioning

confidence: 99%

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Impact of COVID-19 on listed European electricity companies: a comparative analysis of investment in renewable and traditional electricity

Clemente-Almendros

Boldeanu

Seguí-Amórtegui

2021

JES

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PurposeThe authors analyze the impact of COVID-19 on listed European electricity companies and differentiate between renewable and traditional electricity, to show the heterogenous characteristics of electricity subsectors and the differences between renewable and traditional electricity.Design/methodology/approachUsing the event study method, the authors calculate the cumulative average abnormal returns (ARs) before and after the World Health Organization pandemic announcement and the declaration of national lockdowns in Europe.FindingsThe results show that while the European electricity sector was overall negatively impacted by the COVID-19 announcement, this impact was larger for renewable companies due to their riskier investment profile. Moreover, after the national lockdowns came into effect, the recovery in the financial markets return was smaller for the latter.Research limitations/implicationsThere may be variables to be included in the model to analyze possible differences between companies and countries, as well as alternative econometric models. Limited to the data, the authors did not investigate the different impact of the economic policy uncertainty from various countries inside or outside the EU.Practical implicationsThe results have important implications for both investors and policymakers since the heterogenous characteristics of electricity subsectors. This heterogeneity prompts different investor reactions, which are necessary to know and to understand.Originality/valueAs far as the authors know, this is the first study that analyses the effect of COVID-19 in heterogeneity profile of both types of electricity, renewable and traditional.

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Section: Discussionmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

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Impact of COVID-19 on listed European electricity companies: a comparative analysis of investment in renewable and traditional electricity

Clemente-Almendros

Boldeanu

Seguí-Amórtegui

2021

JES

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“…In Europe, in the context of the Clean Energy Transition program, renewable energy has overtaken fossil-based electricity in 2020. Due to the exposure of Europe to the uncertainty of the global economy [60], and the special sensitivity shown by the European markets [61], companies adjusted their expectations, affecting market volatility [62]. Understanding the energy sector and its different characteristics and risk behaviours of the alternative types of energy has become strategic, since in Europe there coexists traditional and renewable ways of producing energy [32], and the strategic decisions made by European countries, in favour of decarbonization in the electricity industry, are clear.…”

Section: Literature Reviewmentioning

confidence: 99%

Is ESG Relevant to Electricity Companies during Pandemics? A Case Study on European Firms during COVID-19

et al. 2022

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The electricity sector was negatively impacted by the coronavirus disease (COVID-19), with considerable declines in consumption in the initial phase. Investors were in turmoil, and stock prices for these companies plummeted. The aim of this paper is to demonstrate the significant negative influence of the pandemic on abnormal returns for the electricity sector, specifically for traditional and renewable companies and the influence of ESG scores, using the event study approach and multi-variate regressions. Our results show that the pandemic indeed had a negative impact on the electricity sector, with renewable electricity companies suffering a sharper decline than traditional ones. Moreover, we find that ESG pillar scores affected electricity companies differently and are sector-specific. For renewable electricity companies, the returns were positively influenced by the environmental ESG scores and negatively by governance ESG scores.

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“…Liu et al (2021) use the GARCH-MIDAS model with economic policy uncertainty (EPU) to forecast the EUA futures volatility, and find that the GARCH-MIDAS model exhibit superior out-of-sample predictive ability. Dai et al (2022) construct the GARCH-MIDAS-EUEPU and GARCH-MIDAS-GEPU models for investigating the impact of European and global economic policy uncertainty on the EUA futures volatility, they find that both European and global economic policy uncertainty will exacerbate the EUA futures return. Wu et al (2022) forecast the EUA futures volatility using EGARCH-MIDAS model, and show that the EUA futures volatility exhibits a leverage effect and the proposed EGARCH-MIDAS model outperforms the traditional competing models.…”

Section: Introductionmentioning

confidence: 99%

Forecasting the volatility of European Union allowance futures with time-varying higher moments and time-varying risk aversion

Mei

Ding

2022

Front. Environ. Sci.

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There is increasing evidence that European Union allowance (EUA) futures return distributions exhibit features of time-varying higher moments (skewness and kurtosis), which plays an important role in modeling and forecasting EUA futures volatility. Moreover, a number of studies have shown that time-varying risk aversion (RA) contains useful information for forecasting EUA futures volatility. In light of this, this paper proposes the GARCH-MIDAS with skewness and kurtosis (hereafter GARCH-MIDAS-SK) to empirically investigate the impact and predictive role of RA on EUA futures volatility. Our empirical results show that RA has a significantly negative impact on the long-term volatility of EUA futures. The EUA futures return distributions exhibit obvious features of time-varying higher moments. Incorporating RA and time-varying higher moments improves the in-sample fitting of the model. Furthermore, out-of-sample results suggest that incorporating RA and time-varying higher moments leads to significantly more accurate volatility forecasts. This finding is robust to alternative out-of-sample forecasting windows.

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The impact of economic policy uncertainties on the volatility of European carbon market

Cited by 27 publications

References 44 publications

Impact of COVID-19 on listed European electricity companies: a comparative analysis of investment in renewable and traditional electricity

Impact of COVID-19 on listed European electricity companies: a comparative analysis of investment in renewable and traditional electricity

Is ESG Relevant to Electricity Companies during Pandemics? A Case Study on European Firms during COVID-19

Forecasting the volatility of European Union allowance futures with time-varying higher moments and time-varying risk aversion

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