Volatility spillovers and conditional correlations between oil, renewables and stock markets: A multivariate GARCH-in-mean analysis

Wang, Wenxue, Moffatt, Peter G., Zhang, Zheng and Raza, Muhammad Yousaf (2025) Volatility spillovers and conditional correlations between oil, renewables and stock markets: A multivariate GARCH-in-mean analysis. Energy Strategy Reviews, 57. ISSN 2211-467X

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Abstract

We investigate linkages between three different markets: renewable energy (represented by a range of renewable energy ETFs); traditional energy (represented by crude oil ETF); and common stocks (represented by the S&P 500 Index ETF). We use daily data from 2008 to 2021. The econometric framework adopted is the VARMA-DCC-GARCH-in-mean model. We find that this framework is ideal because it allows us to identify the impact of uncertainty in one market on returns in another market, and also volatility spillovers, that is, the phenomenon of high uncertainty in one market spreading to other markets. Our key findings are as follows. Stock-market uncertainty influences traditional energy (negatively) and renewable energy (positively) at the mean level. Stock market volatility has a positive spillover effect on both conventional and renewable energies in the short-run, but these spillover effects are negative in the long-run. Our estimates of the time-paths of dynamic conditional correlations provide evidence that the renewable market is more heavily ‘‘financialized’’ than the traditional energy market, and moreover that the strong financialization of renewables is robust to financial crises.

Item Type:	Article
Additional Information:	Data availability statement: Data will be made available on request. Funding information: We acknowledge financial support from National Social Science Fund of China (Grant numbers. 23BJY223) and Shandong Provincial Social Science Foundation (Grant numbers. 24CJJJ24).
Uncontrolled Keywords:	volatility spillovers,conditional variance,garch-in-mean,crude oil future,renewable energy,exchange-traded fund,sdg 7 - affordable and clean energy ,/dk/atira/pure/sustainabledevelopmentgoals/affordable_and_clean_energy
Faculty \ School:	Faculty of Social Sciences > School of Economics
UEA Research Groups:	Faculty of Medicine and Health Sciences > Research Centres > Norwich Institute for Healthy Aging Faculty of Social Sciences > Research Groups > Behavioural Economics Faculty of Social Sciences > Research Groups > Applied Econometrics And Finance Faculty of Social Sciences > Research Centres > Centre for Behavioural and Experimental Social Sciences
Depositing User:	LivePure Connector
Date Deposited:	24 Jan 2025 01:37
Last Modified:	28 Jan 2025 23:49
URI:	https://ueaeprints.uea.ac.uk/id/eprint/98317
DOI:

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