On the connection between clean energy stocks and African stock markets: does uncertainty due to infectious diseases matter?

Ismail Fasanya and Oluwatomisin Oyewole

International Journal of Emerging Markets, 2023, vol. 20, issue 13, 153-180

Abstract: Purpose - As financial markets for environmentally friendly investment grow in both scope and size, analyzing the relationship between green financial markets and African stocks becomes an important issue. Therefore, this paper examines the role of infectious disease-based uncertainty on the dynamic spillovers between African stock markets and clean energy stocks. Design/methodology/approach - The authors employ the dynamic spillover in time and frequency domains and the nonparametric causality-in-quantiles approach over the period of November 30, 2010, to August 18, 2021. Findings - These findings are discernible in this study's analysis. First, the authors find evidence of strong connectedness between the African stock markets and the clean energy market, and long-lived but weak in the short and medium investment horizons. Second, the BDS test shows that nonlinearity is crucial when examining the role of infectious disease-based equity market volatility in affecting the interactions between clean energy stocks and African stock markets. Third, the causal analysis provides evidence in support of a nonlinear causal relationship between uncertainties due to infectious diseases and the connection between both markets, mostly at lower and median quantiles. Originality/value - Considering the global and recent use of clean energy equities and the stock markets for hedging and speculative purposes, one may argue that rising uncertainties may significantly influence risk transmissions across these markets. This study, therefore, is the first to examine the role of pandemic uncertainty on the connection between clean stocks and the African stock markets.

Keywords: Infectious diseases; Spillovers; African markets; Green stocks; Nonparametric causality (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijoemp:ijoem-05-2022-0818

DOI: 10.1108/IJOEM-05-2022-0818

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