Dynamic spillovers between clean energy and non-ferrous metals markets in China: A network-based analysis during the COVID-19 pandemic

Jing Deng, Zihan Xu and Xiaoyun Xing

Resources Policy, 2023, vol. 83, issue C

Abstract: Due to the close production link between clean energy and non-ferrous metals, their price and market dynamics can easily affect one another through production costs. Furthermore, with the increased financialization of clean energy and non-ferrous metals markets, investment risk can easily spread between them. Therefore, this paper intends to explore the risk contagion between the two markets through the spillover index model and the minimum spanning tree (MST) method. Employing the data collected in China, this paper quantifies the magnitude of risk transfer by the volatility spillovers of eight clean energy stock markets as identified in The Energy Conservation and Environmental Protection Clean Industry Statistical Classification 2021 and the eight corresponding non-ferrous metals futures markets, while fully considering the heterogeneity between sub-markets. First, we find that risk is mainly transmitted from clean energy to non-ferrous metals. Second, this paper identifies not only the most influential market but also the shortest path of risk contagion based on the MST topology analysis. Last, the empirical results show that the COVID-19 has increased the scale of risk transmission between the two markets and their connectivity. During the COVID-19 period, the shortest path between the two markets shifted from “hydropower–gold” to “smartgrid–zinc”, and the systematically influential markets correspondingly become smartgrid and zinc. The results obtained in this paper might have practical implications for policymakers seeking to achieve effective risk management, which could also facilitate investors for diversification benefits.

Keywords: Clean energy; Non-ferrous metals; Risk spillovers; Minimum spanning tree; COVID-19 (search for similar items in EconPapers)
JEL-codes: C32 G30 L61 Q40 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:83:y:2023:i:c:s0301420723002866

DOI: 10.1016/j.resourpol.2023.103575

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