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Time-varying tail risk connectedness among sustainability-related products and fossil energy investments

Brian Lucey Orcid Logo, Boru Ren Orcid Logo

Energy Economics, Volume: 126, Start page: 106812

Swansea University Author: Boru Ren Orcid Logo

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DOI (Published version): 10.1016/j.eneco.2023.106812

Abstract

In this paper, we analyse the dynamic transmission of tail risk across a set of well-established sustainability-related financial indices & equities and energy assets using a novel CAViaR-TVP-VAR connectedness measure on daily data from 14 October 2014 to 31 August 2022. Findings suggest that th...

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Published in: Energy Economics
ISSN: 0140-9883 1873-6181
Published: Elsevier BV 2023
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URI: https://cronfa.swan.ac.uk/Record/cronfa64720
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first_indexed 2023-10-17T17:16:49Z
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spelling v2 64720 2023-10-11 Time-varying tail risk connectedness among sustainability-related products and fossil energy investments 73321f2d7e2e1c7bd4be9bf6d47fd2a2 0000-0001-8647-9689 Boru Ren Boru Ren true false 2023-10-11 BAF In this paper, we analyse the dynamic transmission of tail risk across a set of well-established sustainability-related financial indices & equities and energy assets using a novel CAViaR-TVP-VAR connectedness measure on daily data from 14 October 2014 to 31 August 2022. Findings suggest that the total risk connectedness is at medium level and the short-run effect of COVID-19 on the risk transmission was mild. Furthermore, ESG and green equities are persistent net risk transmitters, while green bond, carbon asset, and energy commodities are tail risk takers. The role of renewable energy stocks is inconclusive due to distinct time-varying characteristics. With reference to pairwise relationship, we show that sustainability equities strongly interact with crude oil futures and fossil energy equities. Furthermore, green bond, carbon, natural gas and coal futures weakly associate with the remaining assets in the system. Finally, we find that EPU, OVX, VIX, GPR, and the spread of US Treasury have asymmetric impact on the spillovers. Altogether, our results offer insightful implications for policymakers and especially for “green” and “brown” products investors in risk diversification from the VaR perspective. Journal Article Energy Economics 126 106812 Elsevier BV 0140-9883 1873-6181 ESG, Green bond, Clean energy, Carbon, Energy commodities/equities, Spillovers, VaR 31 10 2023 2023-10-31 10.1016/j.eneco.2023.106812 http://dx.doi.org/10.1016/j.eneco.2023.106812 COLLEGE NANME Accounting and Finance COLLEGE CODE BAF Swansea University 2023-11-27T14:48:10.0855626 2023-10-11T14:49:00.1046476 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance Brian Lucey 0000-0002-4052-8235 1 Boru Ren 0000-0001-8647-9689 2 64720__29119__9c09a0126fab4296a930410397de5418.pdf 64720.VOR.pdf 2023-11-27T14:45:59.1682976 Output 5206874 application/pdf Version of Record true © 2023 The Author(s). Published by Elsevier B.V. Distributed under the terms of a Creative Commons Attribution 4.0 International License (CC BY 4.0). true eng https://creativecommons.org/licenses/by/4.0/
title Time-varying tail risk connectedness among sustainability-related products and fossil energy investments
spellingShingle Time-varying tail risk connectedness among sustainability-related products and fossil energy investments
Boru Ren
title_short Time-varying tail risk connectedness among sustainability-related products and fossil energy investments
title_full Time-varying tail risk connectedness among sustainability-related products and fossil energy investments
title_fullStr Time-varying tail risk connectedness among sustainability-related products and fossil energy investments
title_full_unstemmed Time-varying tail risk connectedness among sustainability-related products and fossil energy investments
title_sort Time-varying tail risk connectedness among sustainability-related products and fossil energy investments
author_id_str_mv 73321f2d7e2e1c7bd4be9bf6d47fd2a2
author_id_fullname_str_mv 73321f2d7e2e1c7bd4be9bf6d47fd2a2_***_Boru Ren
author Boru Ren
author2 Brian Lucey
Boru Ren
format Journal article
container_title Energy Economics
container_volume 126
container_start_page 106812
publishDate 2023
institution Swansea University
issn 0140-9883
1873-6181
doi_str_mv 10.1016/j.eneco.2023.106812
publisher Elsevier BV
college_str Faculty of Humanities and Social Sciences
hierarchytype
hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
url http://dx.doi.org/10.1016/j.eneco.2023.106812
document_store_str 1
active_str 0
description In this paper, we analyse the dynamic transmission of tail risk across a set of well-established sustainability-related financial indices & equities and energy assets using a novel CAViaR-TVP-VAR connectedness measure on daily data from 14 October 2014 to 31 August 2022. Findings suggest that the total risk connectedness is at medium level and the short-run effect of COVID-19 on the risk transmission was mild. Furthermore, ESG and green equities are persistent net risk transmitters, while green bond, carbon asset, and energy commodities are tail risk takers. The role of renewable energy stocks is inconclusive due to distinct time-varying characteristics. With reference to pairwise relationship, we show that sustainability equities strongly interact with crude oil futures and fossil energy equities. Furthermore, green bond, carbon, natural gas and coal futures weakly associate with the remaining assets in the system. Finally, we find that EPU, OVX, VIX, GPR, and the spread of US Treasury have asymmetric impact on the spillovers. Altogether, our results offer insightful implications for policymakers and especially for “green” and “brown” products investors in risk diversification from the VaR perspective.
published_date 2023-10-31T14:48:10Z
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score 11.037319

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