Time-Frequency Spillovers and the Determinants among Fossil Energy, Clean Energy and Metal Markets

Abstract

Using the frequency-domain spillover index method, we investigate time-frequency spillovers and their underlying drivers among fossil energy, clean energy and metal markets. We find that short-term spillovers are stronger than long-term spillovers. Global clean energy markets are powerful spillover transmitters that can have strong impacts on fossil energy and metal markets. Rare earth metals are most vulnerable to spillover effects from clean energy and base metal markets, particularly in the long term. Different clean energy sources and metal markets have heterogeneous connectedness, e.g., the impact of wind energy on rare earth market is greater than that of solar energy. The short-term spillovers are mainly driven by policy changes, while the long-term spillovers are mainly affected by stock market uncertainty and economic fundamentals. Our findings have important implications for the construction of optimal diversification strategies and the design of policy incentives to promote clean energy investments across different time horizons.

Frequency volatility connectedness and portfolio hedging of U.S. energy commodities

“…The first one explores frequency volatility connectedness between energy commodities and a wide range of other asset classes, including agricultural commodities (Kang et al, 2019;Dahl et al, 2020;Tiwari et al, 2020), metals (Tiwari et al, 2020;Yousaf, 2021;Ding et al, 2023), stocks (Costola and Lorusso, 2022;Dai et al, 2022;Mensi et al, 2022b), foreign exchange (Baruník and Kočenda, 2019), gold (Younis et al, 2023;), bonds (Yousaf et al, 2023), and non-energy commodities (Chen et al, 2022).…”