Volatility spillovers and conditional correlations between oil, renewables and stock markets: A multivariate GARCH-in-mean analysis
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...
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| Format: | Article |
| Language: | English |
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Elsevier
2025-01-01
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| Series: | Energy Strategy Reviews |
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| Online Access: | http://www.sciencedirect.com/science/article/pii/S2211467X25000021 |
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| author | Wenxue Wang Peter G. Moffatt Zheng Zhang Muhammad Yousaf Raza |
| author_facet | Wenxue Wang Peter G. Moffatt Zheng Zhang Muhammad Yousaf Raza |
| author_sort | Wenxue Wang |
| collection | DOAJ |
| description | 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. |
| format | Article |
| id | doaj-art-0619f036d77a4b44a3640db071178ecf |
| institution | Kabale University |
| issn | 2211-467X |
| language | English |
| publishDate | 2025-01-01 |
| publisher | Elsevier |
| record_format | Article |
| series | Energy Strategy Reviews |
| spelling | doaj-art-0619f036d77a4b44a3640db071178ecf2025-01-22T05:41:48ZengElsevierEnergy Strategy Reviews2211-467X2025-01-0157101639Volatility spillovers and conditional correlations between oil, renewables and stock markets: A multivariate GARCH-in-mean analysisWenxue Wang0Peter G. Moffatt1Zheng Zhang2Muhammad Yousaf Raza3School of Finance, Shandong Technology and Business University, ChinaSchool of Economics, University of East Anglia, UKSchool of Finance, Shandong Technology and Business University, China; Corresponding author.School of Economics, Shandong Technology and Business University, ChinaWe 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.http://www.sciencedirect.com/science/article/pii/S2211467X25000021Volatility spilloversConditional varianceGARCH-in-meanCrude oil futureRenewable energyExchange-traded fund |
| spellingShingle | Wenxue Wang Peter G. Moffatt Zheng Zhang Muhammad Yousaf Raza Volatility spillovers and conditional correlations between oil, renewables and stock markets: A multivariate GARCH-in-mean analysis Energy Strategy Reviews Volatility spillovers Conditional variance GARCH-in-mean Crude oil future Renewable energy Exchange-traded fund |
| title | Volatility spillovers and conditional correlations between oil, renewables and stock markets: A multivariate GARCH-in-mean analysis |
| title_full | Volatility spillovers and conditional correlations between oil, renewables and stock markets: A multivariate GARCH-in-mean analysis |
| title_fullStr | Volatility spillovers and conditional correlations between oil, renewables and stock markets: A multivariate GARCH-in-mean analysis |
| title_full_unstemmed | Volatility spillovers and conditional correlations between oil, renewables and stock markets: A multivariate GARCH-in-mean analysis |
| title_short | Volatility spillovers and conditional correlations between oil, renewables and stock markets: A multivariate GARCH-in-mean analysis |
| title_sort | volatility spillovers and conditional correlations between oil renewables and stock markets a multivariate garch in mean analysis |
| topic | Volatility spillovers Conditional variance GARCH-in-mean Crude oil future Renewable energy Exchange-traded fund |
| url | http://www.sciencedirect.com/science/article/pii/S2211467X25000021 |
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