Asymmetric effects of financial volatility and volatility-of-volatility shocks on the energy mix

Laurentiu Guinea, Rafaela Perez and Jesús Ruiz

Finance Research Letters, 2024, vol. 61, issue C

Abstract: We examine the asymmetric effects of financial instability shocks and their volatility on the conventional and renewable energy mix. We utilize Chicago Board Options Exchange (CBOE) Volatility Index (VIX) and the Volatility-of-Volatility index (vVIX) in a nonlinear autoregressive distributed lag (NARDL) model to estimate the short- and long-term asymmetry effects across energy mix in Europe, the US, and China. Our estimations indicate that the long-term effects over the energy mix are more significant than their short-term effects. The results also show that the responses to the volatility of financial instability, vVIX, are different from the responses to financial instability itself, VIX, and revealed a more pronounced impact on changes in vVIX compared to VIX. We find that the asymmetries of energy mix responses to positive or negative shocks in VIX and vVIX have been decreasing over the periods.

Keywords: Asymmetries; Financial instability; NARDL; Renewable energy; VIX; Volatility-of-volatility (search for similar items in EconPapers)
JEL-codes: C12 C32 C58 G01 G13 G17 Q42 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Asymmetric effects of financial volatility and volatility-of-volatility shocks on the energy mix (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:61:y:2024:i:c:s1544612323013107

DOI: 10.1016/j.frl.2023.104938

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