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Investigating volatility spillover of energy commodities in the context of the Chinese and European stock markets

Miklesh Prasad Yadav, Taimur Sharif, Shruti Ashok, Deepika Dhingra, Abedin Abedin

Research in International Business and Finance, Volume: 65, Start page: 101948

Swansea University Author: Abedin Abedin

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DOI (Published version): 10.1016/j.ribaf.2023.101948

Abstract

This paper investigates spillover from energy commodities to Shanghai stock exchange and European Stock market, and identifies possible risks transmission and portfolio diversification opportunities. The study is conducted on daily spot prices of carbon (CO2) emission, natural gas and crude oil from...

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Published in: Research in International Business and Finance
ISSN: 0275-5319 1878-3384
Published: Elsevier BV 2023
Online Access: Check full text

URI: https://cronfa.swan.ac.uk/Record/cronfa64242
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Abstract: This paper investigates spillover from energy commodities to Shanghai stock exchange and European Stock market, and identifies possible risks transmission and portfolio diversification opportunities. The study is conducted on daily spot prices of carbon (CO2) emission, natural gas and crude oil from 16 December 2010 to 29 December 2022, employing Granger causality test, dynamic conditional correlation (DCC), Diebold-Yilmaz (2012) and Barunik-Krehlic (2017) models. Results identify higher volatility and imply greater connectedness in the longer run. Additionally, natural gas is witnessed as the highest contributor of the shocks and crude oil as the highest receiver of the shocks from the network connection. Further results suggest for investment in energy commodities in shorter run rather than long run for efficient portfolio diversification. Results from this study are expected to have practical implications for portfolio managers, investors, and market regulators, given the suggestion of this study to incorporate energy stocks for efficient diversification of risk.
Keywords: Spillover, Energy commodity, Chinese stock market, European stock market, Portfolio diversification
College: Faculty of Humanities and Social Sciences
Funders: The authors received no financial support for the research, authorship, and/or publication of this article.
Start Page: 101948

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