Dynamic asymmetric optimal portfolio allocation between energy stocks and energy commodities: Evidence from clean energy and oil and gas companies

Mahdi Ghaemi Asl, Giorgio Canarella and Stephen Miller

Resources Policy, 2021, vol. 71, issue C

Abstract: This paper investigates returns and volatility transmission between SPGCE (S&P Global Clean Energy), SPGO (S&P Global Oil), two non-renewable energy commodities (natural gas and crude oil), and three products of crude oil distillation (heating oil, gasoline, and propane). We estimate a VAR(1) asymmetric BEKK-MGARCH(1,1) using daily U.S. data from March 1, 2010, to February 25, 2020. The empirical findings reveal a vast heterogeneity in spillover patterns of returns, volatilities, and shocks. We employ the empirical results to derive optimal portfolio weights, hedge ratios, and effectiveness measures for SPGCE and SPGO diversified portfolios. We find dynamic diversification advantages of energy commodities, especially heating oil, for energy-related stock markets. We also find that SPGCE and SPGO stocks possess the highest average optimal weight and hedging effectiveness for each other, implying that the positive performance of SPGCE stocks considerably compensates for the negative performance of SPGO stocks. For investors and regulators, the advancement and implementation of clean energy programs and policies, while reducing environmental debt and enhancing “green” growth and sustainable development, provide instruments and strategies to hedge the equity risks inherent in the oil and gas industry.

Keywords: Clean energy stocks; Oil and gas stocks; Asymmetric BEKK; Dynamic optimal portfolios (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0301420720310102
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Dynamic Asymmetric Optimal Portfolio Allocation between Energy Stocks and Energy Commodities: Evidence from Clean Energy and Oil and Gas Companies (2020)
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:jrpoli:v:71:y:2021:i:c:s0301420720310102

DOI: 10.1016/j.resourpol.2020.101982

Access Statistics for this article

Resources Policy is currently edited by R. G. Eggert

More articles in Resources Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().