From volatility spillover to risk spread: An empirical study focuses on renewable energy markets

Wei Zhou, Qinen Gu and Jin Chen

Renewable Energy, 2021, vol. 180, issue C, 329-342

Abstract: System risks caused by volatility spillover would possibly threaten the stability of financial markets. Effective control of volatility spillover is conducive to prevent of financial system risks. Therefore, this paper studies volatility spillover in the main renewable energy markets from 2010 to 2019 and analyzes how risks spread in hope of finding effective management to reduce financial system risks. For this purpose, this paper identifies the volatility spillover effect from a multidimensional perspective by using the BEKK model and reveals the risk spread path by using the multidimensional analysis method. Further, the risk spread relationships among the renewable energy markets are comprehensively analyzed. The main findings of the paper are: (1) The volatility spillover in the renewable energy markets tends to exist in the high dimensions. (2) In the renewable energy market system, the volatility spillover relationships involving multiple markets are more complicated than those between two markets. (3) The fuel cell energy market and solar energy markets occupy a significant position in the path of risk spread which should be paid more attention by policymakers to prevent financial system risks.

Keywords: Volatility spillover; Risk spread; Multidimensional analysis method; VSI index; Renewable energy (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:renene:v:180:y:2021:i:c:p:329-342

DOI: 10.1016/j.renene.2021.08.083

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