The clout of happiness and uncertainty in the environmental transition: Insights from CO2 and clean energy dynamic spillovers

Ilyes Abid, Houda BenMabrouk, Khaled Guesmi and Abir Mansour

Research in International Business and Finance, 2025, vol. 74, issue C

Abstract: This study explores the interconnection between clean energy, CO2 emissions, uncertainty in economic news, and happiness sentiment in the context of environmental transition. Our dataset includes daily returns from Twitter sentiment indices for happiness and uncertainty, as well as the clean energy and carbon emission indexes for the period that spans from June 2nd, 2011, to April 21st, 2023. We investigate the dynamic spillover effects across bear, normal, and bull markets using a quantile vector autoregression (QVAR) model. Furthermore, we investigate, via Augmented E-GARCH and GJR-GARCH models, the effects of investors’ emotion on the volatility of clean energy and CO2 emissions. Several important findings come from our analysis: First, during tranquil periods, there is a low spillover effect among the system. However, we find strong dynamic connections, especially at the extreme upper and lower quantiles, illustrating heightened sensitivity under volatile market conditions. Further, our findings indicate that clean energy and CO2 emissions serve as net spillover transmitters in both bear and normal markets. Finally, we observe that the clean energy volatility exhibits greater sensitivity to extreme shifts in happiness and uncertainty than CO2 emissions, highlighting the vulnerability of clean energy investments to investors sentiment fluctuations within the environmental transition. Our findings offer insightful advice for investors and regulators seeking to navigate the challenges of environmental shifts.

Keywords: Environmental transition; CO2 emission; Clean energy; Quantile spillover index; Happiness; Uncertainty (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:74:y:2025:i:c:s0275531924004926

DOI: 10.1016/j.ribaf.2024.102699

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