Volatility spillovers and frequency dependence between oil price shocks and green stock markets

Waqas Hanif, Tamara Teplova, Victoria Rodina, Mohammed Alomari and Walid Mensi

Resources Policy, 2023, vol. 85, issue PB

Abstract: This study uses wavelet coherence and frequency connectedness techniques to examine the time-frequency dependence and risk connectivity between oil shocks and green stocks. The results show that on mid-term and long-term scales, the dependence relationships between the oil and green stock markets are tighter while lead-lag patterns are mixed and time-varying. Total risk spillovers between the oil and green stock markets are mostly conveyed over time. Risk spillovers from the oil market are substantially larger in the green stock market. Furthermore, global crises such as the Great Recession, the oil price collapse, and the COVID-19 pandemic have substantially amplified the magnitude of risk spillovers. Overall, the green stock market has not yet developed enough potential for a larger independence from the conventional energy market. Hence, for participants in the energy and financial markets who have different time horizons for asset allocation and risk management and for committed investors in particular, the examination of time-frequency dependence and risk spillovers can be quite beneficial.

Keywords: ESG; Green investing; Green stock; Sustainable development; Oil shock; Spillover effect; Wavelet (search for similar items in EconPapers)
JEL-codes: G14 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:85:y:2023:i:pb:s0301420723005718

DOI: 10.1016/j.resourpol.2023.103860

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