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Asymmetric dependency among US national financial conditions and clean energy markets
Hongjun Zeng,
Mohammad Abedin,
Ran Wu,
Abdullahi D. Ahmed
Global Finance Journal
Swansea University Author: Mohammad Abedin
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DOI (Published version): 10.1016/j.gfj.2024.101046
Abstract
This paper examines the relationship between the US National Financial Conditions Index (NFCI) and the clean energy industry using quantile and frequency connectedness, cross-quantile, and wavelet quantile correlation (WQC) techniques. Results reveal (a) a stronger dependence between the NFCI and cl...
| Published in: | Global Finance Journal |
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| ISSN: | 1044-0283 1873-5665 |
| Published: |
Elsevier BV
2024
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| Online Access: |
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| URI: | https://cronfa.swan.ac.uk/Record/cronfa67898 |
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| Abstract: |
This paper examines the relationship between the US National Financial Conditions Index (NFCI) and the clean energy industry using quantile and frequency connectedness, cross-quantile, and wavelet quantile correlation (WQC) techniques. Results reveal (a) a stronger dependence between the NFCI and clean energy under bullish market states. Moreover, the total connectedness between the NFCI and clean energy mostly exhibits time-varying characteristics. In particular, clean energy has a greater spillover effect than the NFCI. (b) Dynamic frequency total connectedness at extreme quantiles provided a more comprehensive view of structural shocks in financial markets, and major crises, such as COVID-19, significantly amplified this connectedness. Overall, the WilderHill Clean Energy Index and the NASDAQ OMX Renewable Energy Index demonstrate substantial potential for hedging financial conditions. (c) The cross-quantile correlation results revealed an asymmetric dependency, demonstrating a sustained significant positive relationship between the NFCI and clean energy index (CEI) across the relative higher quantiles and middle quantiles. The WQC showed that the NFCI and specific CEIs tended to exhibit the strongest positive correlations in nonextreme quantiles and lower frequencies. These results can be of considerable interest to various financial market participants. |
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| Keywords: |
US national financial condition, clean energy markets, quantile connectedness, frequency connectedness, cross-quantilogram, wavelet quantile correlation |
| College: |
Faculty of Humanities and Social Sciences |