Does the energy transition affect return spillovers between multiple energy sources and Chinese industry indices? Network evidence of asymmetric dynamic spillovers

Honghong Kou, Jian Chai, Zhe George Zhang and Shouyang Wang

Energy, 2025, vol. 320, issue C

Abstract: In the context of energy transition, elucidating the dynamic connectedness and direction of return spillovers between the energy market and China Industry Indices (CIIs) is crucial for effective return management and investment decisions. In this study, an asymmetric time-varying “energy-finance” cross-market return spillovers network framework is constructed by combining an asymmetric TVP-VAR-DY model and an MS-VAR model, which is designed to assess the real-time changes in the return spillovers network among traditional energy, clean energy, and SIs in the context of energy transition. Our results suggest real-time spillovers between the energy market and CIIs, with the largest self-covariance shocks in traditional energy and the industrial sector being the major net return transmitter. In addition, significant asymmetric effects of spillovers from positive and negative returns are captured, with the most pronounced spillovers Wind Real Estate Industry Index. It is verified that extreme return spillovers are associated with uncertainty shocks such as major emergencies, policy interventions, and investor sentiment. Return spillovers from Brent crude oil to natural gas and coal are more susceptible to return contagion from clean energy sources compared to other conventional energy sources. The energy transition has been significantly categorized as an exploratory, accelerated and high-quality transition period, with heterogeneity in connectivity networks across the different periods.

Keywords: Energy transition; Clean energy; Asymmetric dynamic connectedness; MS-VAR model; China industry indices (CIIs) (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:320:y:2025:i:c:s0360544225007546

DOI: 10.1016/j.energy.2025.135112

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