Exploring the ripple effect: Time-frequency dynamics of uncertainty indexes, green bonds, oil, and stocks

Soheil Roudari, Farzaneh Ahmadian- Yazdi, Walid Mensi and Aviral Tiwari

MPRA Paper from University Library of Munich, Germany

Abstract: This study investigates the dynamic risk spillover among several uncertainty indices—trade policy uncertainty (TPU), financial policy uncertainty (FPU), and monetary policy uncertainty (MPU)—as well as WTI crude oil prices, the S&P500 stock market, and US green bonds. Utilizing graph theory and the TVP-VAR model, our findings indicate that WTI crude oil, green bonds, and S&P500 stock market returns predominantly act as net transmitters of shocks within the network. In contrast, TPU, FPU, and MPU generally serve as net receivers of these shocks. According to the TVP-VAR-DY analysis, green bonds provide significant benefits for portfolio diversification over the sample period. Nonetheless, the novel graph theory approach reveals that green bonds are not ideal diversifiers in the short term. Additionally, MPU exhibits the highest out-degree in the short term, while FPU shows the highest out-degree in the medium and long term. These results demonstrate the importance of different mathematical approaches, offering valuable insights for investors, policymakers, and academics.

Keywords: Green bonds; stock market; oil; uncertainty index; TVP-VAR and graph theory (search for similar items in EconPapers)
JEL-codes: G14 Q41 Q5 (search for similar items in EconPapers)
Date: 2024-05-15
New Economics Papers: this item is included in nep-ene and nep-env
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