Dynamic and asymmetric connectedness in the global “Carbon-Energy-Stock” system under shocks from exogenous events

Ming-Yuan Yang, Zhanghangjian Chen, Zongzheng Liang and Sai-Ping Li

Journal of Commodity Markets, 2023, vol. 32, issue C

Abstract: In this paper, by using the time-varying parameter vector autoregression model (TVP-VAR) with the asymmetric connectedness indicator and network diagrams, we investigate the dynamic and asymmetric return connectedness in the global “Carbon-Energy-Stock” system, including carbon markets and stock markets of the three largest economies, namely the United States, European Union and China, and fossil energies of crude oil and natural gas under exogenous shocks. Our study shows that (i) the risk spillover level of the global system has significantly increased after the outbreak of two exogenous events, the COVID-19 pandemic and the Russo-Ukrainian war, and the global shock from the COVID-19 pandemic has more widespread and greater impact on the system than the geopolitical shock from the Russo-Ukrainian war, (ii) the global “Carbon-Energy-Stock” system is more sensitive to negative information on price returns than positive information, and the asymmetry of the connectedness is much larger when the system is active and in the presence of exogenous shocks, (iii) risks in the global “Carbon-Energy-Stock” system usually transformed from stock markets, especially the stock markets of the United States and European Union, to the carbon markets. These findings provide valuable guidance and have economic implications for both investors and policymakers worldwide.

Keywords: Carbon markets; Global system; Dynamic connectedness; Asymmetric connectedness; Exogenous shocks (search for similar items in EconPapers)
JEL-codes: C32 C50 G12 Q43 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocoma:v:32:y:2023:i:c:s2405851323000569

DOI: 10.1016/j.jcomm.2023.100366

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