From forests to faucets to fuel: Investigating the domino effect of extreme risk in timber, water, and energy markets

Muhammad Abubakr Naeem, Najaf Iqbal, Sitara Karim and Brian Lucey

Finance Research Letters, 2023, vol. 55, issue PB

Abstract: This study explores the interdependence between timber, water, and energy markets and investigates the potential domino effect of extreme risk across these markets. Specifically, using CAViaR-TVP-VAR, we examine the role of water and timber investments as safe-havens and hedges for traditional energy markets, before and after the COVID-19 pandemic. Our results indicate that water and timber markets can serve as reliable safe-haven options for energy investors. Moreover, our findings suggest a weak link between natural gas and its counterparts, underscoring the need for energy portfolios to diversify. This study provides valuable insights for investors seeking to navigate extreme risk.

Keywords: Water and timber; Tail-risk spillovers; CAViaR; Oil and gas (search for similar items in EconPapers)
JEL-codes: G11 Q02 Q15 Q23 Q25 Q5 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:55:y:2023:i:pb:s1544612323003823

DOI: 10.1016/j.frl.2023.104010

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