Dynamic and asymmetric effects between carbon emission trading, financial uncertainties, and Chinese industry stocks: Evidence from quantile-on-quantile and causality-in-quantiles analysis

Jiatong Liu, Weifang Mao and Xingzhi Qiao

The North American Journal of Economics and Finance, 2023, vol. 65, issue C

Abstract: This paper investigates the dynamic and asymmetric effects between carbon emission trading (CET), financial uncertainties, and Chinese stocks in different industries over the period from 19th December 2013 to 21st March 2022. We utilized a novel quantile framework including rolling window quantile regression method, quantile-on-quantile method, and causality-in-quantiles method to implement this research more comprehensively and accurately. Our contributions and findings, empirical in nature, are as follows: (i) In the early establishing stage of the carbon market, with a bullish market situation, carbon emission trading has a negative impact on most industry stocks. In the developing and improving stage of the carbon market, different industries have different impact situations. (ii) We find that the effects of financial uncertainty on stocks are stronger than CET on stocks. We also find that the dependence structures between CET, financial uncertainty, and industry stocks are asymmetric in most industries, and there are many mutation structures with significant risks in extreme situations. (iii) Carbon emissions trading, crude oil volatility, and US stock volatility all have strong causal relationships with Chinese industry stocks. (iv) We also provide policy suggestions to relevant countries to balance carbon market and stock markets and avoid risks from financial uncertainty in different industries.

Keywords: Dynamic and asymmetric effect; Carbon emission trading; Financial uncertainties; Chinese Industry Stock; Quantile-on-quantile; Causality-in-quantiles (search for similar items in EconPapers)
JEL-codes: C32 D80 G10 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:65:y:2023:i:c:s1062940823000062

DOI: 10.1016/j.najef.2023.101883

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