Measuring risk spillovers between oil and clean energy stocks: Evidence from a systematic framework

Xueping Tan, Yong Geng, Andrew Vivian and Xinyu Wang

Resources Policy, 2021, vol. 74, issue C

Abstract: Increasing concern about the challenges of climate change has triggered rapid growth of private investment into clean energy sectors. Currently, the uncertain global economic environment makes the risk spillovers in the “Oil-Clean energy stocks” system a vital topic to explore. Using a systematic framework involving both Spillover index and Multivariate quantile models, this paper aims at revealing the heterogeneous risk transmission mechanisms between WTI oil futures and 12 clean energy stock indexes over the period of October 2010 to August 2020 from a systematic perspective by considering both regular and extreme conditions. We find asymmetric and time-varying features in the connections between oil and clean energy. The main findings include: (1) responses of extreme downside risks are substantially intensified compared to normal and upside risks; (2) the (downside) VaR response of oil to shocks of clean energy stocks is greater when the oil price is low; (3) the (downside) VaR response of clean energy to oil shocks is heterogeneous especially when the oil price is low. We also find that oil market is a net volatility receiver from clean energy sector overall and especially from the Advanced material and Energy efficiency groups. However, oil is a risk trigger for the Renewable energy group. These findings have significant and abundant implications for investors, portfolio managers, and policymakers to inform their decision-making and promote clean energy investment.

Keywords: Clean energy stock; Crude oil price; Risk spillover; Spillover index; VAR for VaR (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:74:y:2021:i:c:s0301420721004153

DOI: 10.1016/j.resourpol.2021.102406

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