TY - JOUR
T1 - Analyzing the static and dynamic dependence among green investments, carbon markets, financial markets and commodity markets
AU - Abakah, Emmanuel Joel Aikins
AU - Tiwari, Aviral Kumar
AU - Oliyide, Johnson Ayobami
AU - Appiah, Kingsley Opoku
N1 - Publisher Copyright:
© 2023, Emerald Publishing Limited.
PY - 2023
Y1 - 2023
N2 - Purpose: This paper investigates the static and dynamic directional return spillovers and dependence among green investments, carbon markets, financial markets and commodity markets from January 2013 to September 2020. Design/methodology/approach: This study employed both the quantile vector autoregression (QVAR) and time-varying parameter VAR (TVP-VAR) technique to examine the magnitude of static and dynamic directional spillovers and dependence of markets. Findings: Results show that the magnitude of connectedness is extremely higher at quantile levels (q = 0.05 and q = 0.95) compared to those in the mean of the conditional distribution. This connotes that connectedness between green bonds and other assets increases with shock size for both negative and positive shocks. This further indicates that return shocks spread at a higher magnitude during extreme market conditions relative to normal periods. Additional analyses show the behavior of return transmission between green bond and other assets is asymmetric. Practical implications: The findings of this study offer significant implications for portfolio investors, policymakers, regulatory authorities and investment community in terms of carefully assessing the unique characteristics offered by each markets in terms of return spillovers and dependence and diversifying the portfolios. Originality/value: The study, first, uses a relatively new statistical technique, the QVAR advanced by Ando et al. (2018), to capture upper and lower tails’ quantile price connectedness and directional spillover. Therefore, the results possess adequate power against departure from mean-based conditional connectedness. Second, using a portfolio of green investments, carbon markets, financial markets and commodity markets, the uniqueness of this study lies in the examination of the static and dynamic dependence of the markets examined.
AB - Purpose: This paper investigates the static and dynamic directional return spillovers and dependence among green investments, carbon markets, financial markets and commodity markets from January 2013 to September 2020. Design/methodology/approach: This study employed both the quantile vector autoregression (QVAR) and time-varying parameter VAR (TVP-VAR) technique to examine the magnitude of static and dynamic directional spillovers and dependence of markets. Findings: Results show that the magnitude of connectedness is extremely higher at quantile levels (q = 0.05 and q = 0.95) compared to those in the mean of the conditional distribution. This connotes that connectedness between green bonds and other assets increases with shock size for both negative and positive shocks. This further indicates that return shocks spread at a higher magnitude during extreme market conditions relative to normal periods. Additional analyses show the behavior of return transmission between green bond and other assets is asymmetric. Practical implications: The findings of this study offer significant implications for portfolio investors, policymakers, regulatory authorities and investment community in terms of carefully assessing the unique characteristics offered by each markets in terms of return spillovers and dependence and diversifying the portfolios. Originality/value: The study, first, uses a relatively new statistical technique, the QVAR advanced by Ando et al. (2018), to capture upper and lower tails’ quantile price connectedness and directional spillover. Therefore, the results possess adequate power against departure from mean-based conditional connectedness. Second, using a portfolio of green investments, carbon markets, financial markets and commodity markets, the uniqueness of this study lies in the examination of the static and dynamic dependence of the markets examined.
KW - Carbon price
KW - Clean energy
KW - Green bond
KW - Quantile connectedness
KW - Spillover
KW - Stocks
UR - http://www.scopus.com/inward/record.url?scp=85158827320&partnerID=8YFLogxK
U2 - 10.1108/IJMF-09-2021-0428
DO - 10.1108/IJMF-09-2021-0428
M3 - Article
AN - SCOPUS:85158827320
SN - 1743-9132
JO - International Journal of Managerial Finance
JF - International Journal of Managerial Finance
ER -