Dynamic risk spillover and hedging efficacy of China’s carbon-energy-finance markets: Economic policy uncertainty and investor sentiment non-linear causal effects

Yuanyuan Man, Sunpei Zhang and Yongda He

International Review of Economics & Finance, 2024, vol. 93, issue PA, 1397-1416

Abstract: This study evaluates the risk spillover and hedging performance of China’s carbon-energy-finance markets system before and after its establishment of national unified carbon market by employing TVP-VAR-DY model framework. And we analyze the non-linear causal effects of economic policy uncertainty (EPU) and investor sentiment on the net risk spillover of the carbon-energy-finance markets. The findings indicate that carbon-energy-finance spillovers demonstrate time-varying, asymmetric，and heterogeneous features. Hedging other market risks through a portfolio with a short carbon position is typically associated with lower costs and enhanced hedging efficiency. EPU has a significant and sustained impact on risk spillovers within the carbon and natural gas, and bond markets; similarly, investor sentiment maintains a substantial and consistent impact on risk spillovers among the carbon, natural gas, and coal markets.

Keywords: Carbon market; Risk spillovers; Hedging performance; Economic policy uncertainty; Investor sentiment (search for similar items in EconPapers)
JEL-codes: C32 G11 Q43 Q56 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056024002314
Full text for ScienceDirect subscribers only

Related works:
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:reveco:v:93:y:2024:i:pa:p:1397-1416

DOI: 10.1016/j.iref.2024.03.066

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().