Directional predictability and time-frequency spillovers among clean energy sectors and oil price uncertainty

Christian Urom, Hela Mzoughi, Gideon Ndubuisi and Khaled Guesmi

The Quarterly Review of Economics and Finance, 2022, vol. 85, issue C, 326-341

Abstract: This paper analyzes the dependence among clean energy sectors and oil price uncertainty using the NASDAQ OMX Green Economy Index for the Building, Economy, Edge, Financial, Technology and Transport sectors in the United States. First, we use the wavelet and Cross-Quantilogram (CQ) techniques to examine the directional predictability from oil price uncertainty to these clean energy sectors across different investment horizons and market conditions. Secondly, we use the Time-Varying Parameter (TVP-VAR) model with stochastic volatility to characterize the level of spillovers among the clean energy sectors and oil market uncertainty under different investment horizons. Results from the CQ demonstrate strong evidence of heterogeneous dependence and predictability from oil market uncertainty to clean energy sectors across different market conditions and investment horizons, pointing out the importance of active portfolio management. Also, we find that the level of shock spillovers is weak in the short-term but strengthens towards the intermediate- and long-term. In addition, there are other notable heterogeneities regarding the amount of information content for the different sectors’ and at different investment horizons from oil price uncertainty. Taken together, our results demonstrate that the direction and magnitude of the response of clean energy sectors to oil market uncertainty vary across sectors, and depend on market conditions and investment horizons. We document some crucial market conditions as well as horizon-specific implications for portfolio diversification for clean energy investors and portfolio managers.

Keywords: Energy market; Stock market; Asymmetric shocks; Oil-price uncertainty (search for similar items in EconPapers)
JEL-codes: C58 G10 Q42 R11 (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)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062976922000503
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:85:y:2022:i:c:p:326-341

DOI: 10.1016/j.qref.2022.04.005

Access Statistics for this article

The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty

More articles in The Quarterly Review of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().