The dynamic connectedness and hedging opportunities of implied and realized volatility: Evidence from clean energy ETFs

İsmail Çelik, Ahmet Furkan Sak, Arife Özdemir Höl and Gizem Vergili

The North American Journal of Economics and Finance, 2022, vol. 60, issue C

Abstract: This paper aims to examine dynamic connectedness and hedging opportunities between the realized volatilities of clean energy ETFs and energy implied volatilities through Time-Varying Parameter Vector Autoregression Model (TVP-VAR) and Asymmetric Dynamic Conditional Correlation (ADCC) GARCH models. TVP-VAR analysis results show that dynamic connectedness increases during turbulence periods. We also determine that clean energy ETFs such as PBW, QCLN, SMOG, and TAN are net volatility transmitters. Surprisingly, OVX is a net volatility receiver, especially with the developments after the Paris Agreement in 2016.

Keywords: Clean energy ETF; Implied volatility; Dynamic connectedness; Hedging effectiveness (search for similar items in EconPapers)
JEL-codes: C22 G11 Q42 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:60:y:2022:i:c:s1062940822000262

DOI: 10.1016/j.najef.2022.101670

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