Extreme connectedness between renewable energy tokens and fossil fuel markets

Imran Yousaf, Ramzi Nekhili and Muhammad Umar

Energy Economics, 2022, vol. 114, issue C

Abstract: This paper examines the aspect pertaining to the returns connectedness between renewable energy tokens, namely, Powerledger-POWR and WePower-WPR, and the fossil fuel markets, namely, WTI oil, Brent oil, and Natural gas. For this purpose, we employed a quantile-based regression approach, in order to explore the dependence structures that exist under diverse market conditions. The results of the analysis show that the element of connectedness in the renewable energy tokens-fossil fuel market nexus is characterized by asymmetry and heterogeneity in the tails that are compared to the respective mean and the median. Under normal market conditions, the WTI oil market emerges as the main net transmitter of return spillover to the renewable energy tokens. Whereas, Brent oil and natural gas markets are the net receivers of the return spillover from the digital assets. However, under periods of extreme negative returns, the Brent oil market behaves as the main net transmitter of return spillover to the renewable energy digital markets. Whereas, under period of extreme positive returns, the natural gas market appears to be the main net transmitter of return spillover to the renewable energy digital markets. Therefore, it can be fathomed that on aggregate, renewable energy digital tokens are weakly connected with fossil fuel markets, thus suggesting the addition of renewable energy tokens in the portfolio of fossil fuel markets.

Keywords: Renewable energy tokens; Fossil fuel markets; Quantile spillover (search for similar items in EconPapers)
JEL-codes: C40 F36 G10 G12 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (42)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:114:y:2022:i:c:s0140988322004340

DOI: 10.1016/j.eneco.2022.106305

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