Exploring the dynamic connectedness between uranium stocks and metals: Implications for portfolio diversification

Muhammad Shahzad Ijaz, Alishba Rahman Ullah and Sang Hoon Kang

Energy Economics, 2025, vol. 146, issue C

Abstract: As nations worldwide endeavor to address climate change, there is an ongoing debate on the transition toward low-carbon energy systems to mitigate greenhouse gas emissions. Nuclear energy, recognized as a significant low-carbon alternative, has garnered increased attention from governments and investors. In this context, this study employs a TVP-VAR time and frequency connectedness framework to examine the interrelationship between uranium stocks and precious and industrial metals using data on six uranium stocks and nine precious and industrial metals from July 14, 2010, to August 23, 2024. Our time-domain analysis demonstrates that Silver, Platinum, Zinc, and Copper function as net transmitters of return shocks, whereas uranium stocks act primarily as net receivers. In terms of volatility, three uranium stocks and Nickel emerge as net transmitters, while the remaining stocks (Gold, Silver, Palladium, and Copper) serve as net recipients. Our frequency domain results indicate that short-term spillovers predominate in both return and volatility connectedness, suggesting the transient nature of these effects. Furthermore, our findings underscore the importance of addressing climate risk as the interrelationships between uranium stocks and metals highlight their susceptibility to environmental and policy-related uncertainties. Furthermore, our portfolio analysis supports the hypothesis that uranium stocks may provide stability and diversification benefits during periods of volatility in metals markets. For policy insights, financial regulators need to improve their risk-monitoring systems amid these interactions. They should also consider the potential effects of investment in nuclear energy on investors in precious and industrial metals. Furthermore, portfolio managers can use uranium stocks as hedges against metal market volatility.

Keywords: Uranium stocks; Precious metals; Industrial metals; Portfolio optimization; Nuclear energy; Climate action (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:146:y:2025:i:c:s0140988325003172

DOI: 10.1016/j.eneco.2025.108493

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