Idiosyncratic and systematic spillovers through the renewable energy financial systems

Marco Tedeschi (m.tedeschi@pm.univpm.it)

No 483, Working Papers from Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali

Abstract: This study examines the relationship between fossil fuels energy prices and renewable energy ETFs through a two-step approach: cointegration analysis and volatility spillover examination at both aggregate and frequency levels. Using daily closing prices from May 5, 2014, to October 31, 2023, we find evidence of cointegration among prices and a substitutedness (complementarity) relationship between fossil fuels and eolic (solar) energy. Exploring the system's common trend and correction mechanism underscores the influential role of growing Environmental, Social, and Governance (ESG) sentiment in the market. External events, such as the Russia-Ukraine war and the Covid-19 pandemic, have discernible impacts on financial prices. The study provides valuable implications for investors and hedgers, offering guidance for portfolio optimization and emphasizing the consideration of sustainable financial products.

Keywords: Cointegration; Spillovers: Renewable Energies; Fossil Fuels; ESG. (search for similar items in EconPapers)
JEL-codes: C22 C58 Q40 (search for similar items in EconPapers)
Pages: 59
Date: 2023-12
New Economics Papers: this item is included in nep-cis, nep-ene, nep-env and nep-tra
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