Dynamic volatility spillovers and investment strategies between crude oil, new energy, and resource related sectors

Zhifeng Dai, Zhuang Luo and Chang Liu

Resources Policy, 2023, vol. 83, issue C

Abstract: Promoting green and low-carbon development with new energy, and resource related sectors is an important way for mankind to deal with global climate change. With the marketization of new energy, the public and regulators have paid extensive attention to market relevance and risk contagion in China. In order to analyze the risk contagion mechanism, this paper examines the dynamic conditional correlation and the volatility spillover effect between crude oil, new energy, and resource related sectors. In addition, we compared the optimal diversification strategy by calculating hedging ratios and portfolio weights. The main results are as follows：First, new energy and resource related sectors have high dynamic correlation and the volatility spillover effect is significant. Second, from the perspective of net spillover index, new energy is the largest net volatility transmitter and WTI is the largest net volatility receiver. Third, when new energy is a long (short) position, the hedging efficiency of the portfolio with new energy vehicles using the hedging ratio strategy is the greatest. And when new energy is long, taking a short position in new energy vehicles is the most effective hedging strategy, but the most expensive hedging strategies are found in resource related sectors.

Keywords: New energy; Spillover effects; Hedging effectiveness; Investment strategies (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:83:y:2023:i:c:s0301420723003926

DOI: 10.1016/j.resourpol.2023.103681

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