Oil shocks and volatility of green investments: GARCH-MIDAS analyses

Olaoluwa Yaya, Ahamuefula Ogbonna and Xuan Vinh Vo

Resources Policy, 2022, vol. 78, issue C

Abstract: This study examines how market volatility of five green investments (Standard & Poor's - S&P [Green bond select index and Green bond index] and Morgan Stanley Capital International - MSCI [Global alternative energy index, Global pollution prevention index, and Global green building index]) respond to oil shocks; using the Generalized Autoregressive Conditional Heteroscedasticity with Mixed Data Sampling (GARCH-MIDAS) modelling framework. We employ Baumeister and Hamilton's decomposed oil shocks: economic activity shocks, oil consumption demand shocks, oil inventory demand shocks, and oil supply shocks; each in their original levels, as well as their negatively and positively disaggregated levels. Our findings show homogeneous and heterogeneous responses of green investments volatility to variants of oil shocks. Asymmetry effect is also evidenced, given the differences between the estimated effect of positive and negative oil shocks on the volatility of green investments.

Keywords: GARCH-MIDAS; Green bond; Oil shocks; Asymmetry (search for similar items in EconPapers)
JEL-codes: C32 G12 G15 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Working Paper: Oil shocks and volatility of green investments: GARCH-MIDAS analyses (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:78:y:2022:i:c:s0301420722002379

DOI: 10.1016/j.resourpol.2022.102789

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