Abstract
This study aims to explore the dynamic return and volatility spillover among oil, sectoral clean energy markets, and green equity across different tails spanning from January 2014 to May 2023. The investigation utilizes a spillover approach based on the QVAR model. The empirical results highlight the time-varying nature of return and volatility spillover indices, influenced by significant events. Notably, the interconnection intensified during pivotal periods, including the oil shale revolution, the COVID-19 pandemic, and the Russia–Ukraine conflict, observed across the median, lower, and upper tails. The quantile spillover analysis reveals asymmetric behavior at both the left and right tails, emphasizing the increased impact of large shocks compared to smaller ones. Additionally, the directional spillover exhibits variability across quantiles. In conclusion, we present several diversification benefits for environmentally conscious investors to reduce portfolio risk without compromising sustainability goals. This is achieved by strategically investing in eco-friendly assets to maintain portfolios with low carbon. Indeed, policymakers should consider the impact of global events, such as economic crises and geopolitical conflicts, on financial market dynamics, recognizing the need for measures that enhance stability and facilitate a smooth transition to green finance.
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Data availability
The data supporting the findings of this study are available from the corresponding author upon request.
Notes
For more details about the advantage of using absolute returns as a measure of volatility, see Forsberg and Ghysels (2007)
To conserve space, we have omitted the presentation of the remaining spillover series, such as TO and FROM. However, these additional data are accessible from the authors upon request.
For robustness, we reexamine the QVAR model based on various rolling window sizes and forecast horizons. We obtained similar results, confirming the robustness of our findings.
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Yousfi, M., Bouzgarrou, H. Quantile network connectedness between oil, clean energy markets, and green equity with portfolio implications. Environ Econ Policy Stud (2024). https://doi.org/10.1007/s10018-024-00393-5
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DOI: https://doi.org/10.1007/s10018-024-00393-5