EconPapers    
Economics at your fingertips  
 

Multivariate dependence and spillover effects across energy commodities and diversification potentials of carbon assets

Gazi Uddin (), Jose Areola Hernandez, Syed Jawad Hussain Shahzad () and Axel Hedström

Energy Economics, 2018, vol. 71, issue C, 35-46

Abstract: In a first step, we model the multivariate tail dependence structure and spillover effects across energy commodities such as crude oil, natural gas, ethanol, heating oil, coal and gasoline using canonical vine (C-vine) copula and c-vine conditional Value-at-Risk (CoVaR). In the second step, we formulate portfolio strategies based on different performance measures to analyze the risk reduction and diversification potential of carbon assets for energy commodities. We identify greater exposure to losses arising from investments in heating oil and ethanol markets. We also find evidence of carbon asset providing diversification benefits to energy commodity investments. These findings motivate for regulatory adjustments in the trading and emission permits for the energy markets most strongly diversified by carbon assets.

Keywords: Carbon assets; Energy commodities; Tail dependence; Risk spillover (search for similar items in EconPapers)
JEL-codes: C58 G10 G11 Q02 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988318300513
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Multivariate dependence and spillover effects across energy commodities and diversification potentials of carbon assets (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:71:y:2018:i:c:p:35-46

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-04-18
Handle: RePEc:eee:eneeco:v:71:y:2018:i:c:p:35-46