Risk spillover analysis across worldwide ESG stock markets: New evidence from the frequency-domain

Yang Gao, Yangyang Li, Chengjie Zhao and Yaojun Wang

The North American Journal of Economics and Finance, 2022, vol. 59, issue C

Abstract: With the increasing global awareness of green environmental protection, the international environmental, social, and governance (ESG) stock markets are developing rapidly together with rising risk linkages across worldwide markets. Therefore, this study explores the risk spillover characteristics of international ESG stock markets in the time and frequency domains and constructs a risk linkage network to further explore the risk contagion mechanism. The results show that in most cases, the developed North American market is the core of outward risk spillover in international ESG stock markets. The entire system presents a small-world structure, and the internal regions display different risk spillover characteristics. Moreover, international ESG markets generally have strong time–frequency spillover and medium-frequency (a month to a year) spillover. In contrast, thehigh- (a day to a month) and low-frequency (more than one year) spillovers are located at relatively low levels, but they will rise significantly under sudden financial events. The empirical results expand the ESG stock market's theoretical framework and provide a reference for investors and market regulators to reduce the investment risk of ESG.

Keywords: International ESG stock markets; Risk spillover; Financial risk network; Frequency domain (search for similar items in EconPapers)
JEL-codes: F65 G10 G15 Q50 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:59:y:2022:i:c:s1062940821002151

DOI: 10.1016/j.najef.2021.101619

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