Spillover effects of clean energy risks and the impacts of economic policy uncertainty on the stability of the equity market: A dependence dynamics analysis

Ching-Chi Hsu and Wei-Che Tsai

The North American Journal of Economics and Finance, 2025, vol. 80, issue C

Abstract: This study investigates the spillover effects of clean energy risks and economic policy uncertainty on the stability of the equity market. We use dependence dynamics through copulas with regime switching to analyze the dependence pattern of the spillover effects and the stability of the equity market. The dependence dynamics model results reveal the existence of asymmetric dependence between these factors, with the impact of the spillover effect on the stability of the equity market being more pronounced in the high-dependence regime. To test our findings, we formulate an investment strategy to facilitate an investigation of investment efficiency and profitability. Our performance test results confirm that our investment strategy outperforms, producing a high ratio of investment efficiency. Our research indicates that an unstable economic policy environment can increase clean energy risks, ultimately having spillover effects on the stability of the equity market. Our study provides references for policy regulators to design or adjust their energy policies and a guide for investors to make strategic investment decisions to avoid clean energy risks.

Keywords: Spillover; Clean energy risks; Economic policy uncertainty; Dependence dynamics through copulas with regime switching (search for similar items in EconPapers)
JEL-codes: E32 G10 G11 Q40 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:80:y:2025:i:c:s1062940825001159

DOI: 10.1016/j.najef.2025.102475

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