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Dependence between the GCC energy equities, global clean energy and emission markets: Evidence from wavelet analysis

Mohammed A. Alkathery, Kausik Chaudhuri and Muhammad Ali Nasir

Energy Economics, 2023, vol. 121, issue C

Abstract: In the context of the debate on energy transition and its implication for the energy-export-dependent GCC region, this study developed a dependence structure using a multiscale approach of wavelets to investigate the impact of global clean energy production, oil price and CO2 emission prices on the energy stock markets of the largest three oil exporters in the GCC region: Saudi, UAE and Kuwait. Our key findings indicate that the three global energy markets are weakly and positively correlated with the GCC energy stock prices at lower frequencies (higher scales). Besides, at the same level of frequencies, we found that changes in the global clean energy production index and CO2 emission price positively influence the three GCC energy stock prices. Oil price is a stronger moderator for the three GCC energy equities at lower frequencies relative to other variables, especially for Kuwait's energy stock price. We also discover that the Abu Dhabi energy index is more sensitive to swings in the three perspective markets compared to Saudi and Kuwait energy markets. These findings carry important implications and guidelines for policymakers, portfolio managers and scholars who attempt to understand the dynamic nexus between GCC energy sectors stock, global transition to clean energy and pricing emissions.

Keywords: EU-ETS; Energy transition; Oil price; GCC; CO2 emissions; Clean energy; Wavelet analysis; Stock market (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1016/j.eneco.2023.106659

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