Time and Frequency Connectedness Among Oil Shocks, Electricity and Clean Energy Markets

Abstract

This paper examines the time and frequency dynamics of connectedness between oil price shocks (demand and supply), and energy, electricity, carbon and clean energy markets using the methodology developed by Diebold and Yilmaz (2012) and Barunik and Krehlik (2018). The empirical findings show that there is time-varying connectedness among all variables in the sample. We find increased connectedness during the global financial crisis as well as in the shale oil revolution period. The total connectedness is more significant and higher in the short-term compared to the long-term. Net pairwise directional connectedness become more important during the shale oil revolution among oil supply, oil demand and clean energy index. The findings of the static full sample and sub-samples (GFC and SOR) provide significant evidence of the electricity futures as diversifier and safe-haven asset for oil shocks. These results can have important implications for investors and policymakers with different time horizons.

Asymmetric volatility spillover among Chinese sectors during COVID-19

“…In this section, we use the Baruník and Křehlík (BK) approach to examine the spillover among the ten sectors. Following the recent literature, such as Hasan, Arif, Naeem, Ngo, and Taghizadeh–Hesary, F. (2020) and Naeem, Peng, Suleman, Nepal, and Shahzad (2020) , we focus on two horizons: short- and long-term, defined as 1 to 5 days and more than 5 days, respectively.…”

COVID-19 and time-frequency connectedness between green and conventional financial markets

“…Like green bonds and green stocks, clean energy is a commodity market that also shares an environment-friendly objective and attracts investors' interest towards these low carbon instruments. Recent empirical evidence suggests that including clean energy in investment portfolios provides diversification benefits ( Naeem et al, 2020a , Naeem et al, 2020b ). In particular, portfolio managers holding energy commodities may include clean energy in their portfolios to fulfil diversification objectives over the long-term horizons ( Naeem et al, 2020a , Naeem et al, 2020b ).…”

“…Recent empirical evidence suggests that including clean energy in investment portfolios provides diversification benefits ( Naeem et al, 2020a , Naeem et al, 2020b ). In particular, portfolio managers holding energy commodities may include clean energy in their portfolios to fulfil diversification objectives over the long-term horizons ( Naeem et al, 2020a , Naeem et al, 2020b ).…”

Risk transmission from the COVID-19 to metals and energy markets

“…In a multivariate setting to estimate spillovers, the BEKK-GARCH model is more relevant than the univariate models ( Arouri et al, 2011 ). Apart from BEKK-GARCH model, several other models are also available for the connectedness analysis like Wavelet approach and Diebold & Yilmaz approach etc., ( Umar et al, 2021 ; Naeem et al, 2020 ). Moreover, Baek and Lee (2020) use the BEKK-MGARCH model to examine the volatility/risk transmission from the COVID-19 deaths to the US stock market.…”