Investigating volatility spillover of energy commodities in the context of the Chinese and European stock markets

Miklesh Prasad Yadav, Taimur Sharif, Shruti Ashok, Deepika Dhingra and Mohammad Zoynul Abedin

Research in International Business and Finance, 2023, vol. 65, issue C

Abstract: This paper investigates spillover from energy commodities to Shanghai stock exchange and European Stock market, and identifies possible risks transmission and portfolio diversification opportunities. The study is conducted on daily spot prices of carbon (CO2) emission, natural gas and crude oil from 16 December 2010 to 29 December 2022, employing Granger causality test, dynamic conditional correlation (DCC), Diebold-Yilmaz (2012) and Barunik-Krehlic (2017) models. Results identify higher volatility and imply greater connectedness in the longer run. Additionally, natural gas is witnessed as the highest contributor of the shocks and crude oil as the highest receiver of the shocks from the network connection. Further results suggest for investment in energy commodities in shorter run rather than long run for efficient portfolio diversification. Results from this study are expected to have practical implications for portfolio managers, investors, and market regulators, given the suggestion of this study to incorporate energy stocks for efficient diversification of risk.

Keywords: Spillover Energy commodity Chinese stock market European stock market Portfolio diversification (search for similar items in EconPapers)
JEL-codes: G11 O16 P52 Q02 Q51 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:65:y:2023:i:c:s0275531923000740

DOI: 10.1016/j.ribaf.2023.101948

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