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Energy Market Risk Management under Uncertainty: A VaR Based on Wavelet Approach

Author

Listed:
  • Huthaifa Sameeh Alqaralleh

    (Department of Economics, Business and Finance, Mutah University, Jordan,)

  • Ahmad Al-Saraireh

    (Department of Banking and Finance, Mutah University, Jordan)

  • Alessandra Canepa

    (Department of Economics and Statistics Cognetti De MArtiis, University of Turin, Lungo Dora Siena, Turin, Italy,)

Abstract

This study contributes to the literature on energy market risk management and portfolio management by examining co-movements between several energy commodities in a portfolio context in light of the impact of several types of uncertainty over time and under high, medium, and low frequencies. Using of wavelet decomposition analysis, we first investigate the lead-lag relationship together with the power of the correlation over time between major renewable and non-renewable energy indexes and uncertainty indexes. Second, we explore the contribution of uncertainty to the energy portfolio. Our procedure reveals that a dependent relationship generally exists between energy returns and changes in uncertainty. The risks of clean energy and crude oil returns are more sensitive to financial uncertainties, whereas investing in GAS markets offers market diversification opportunities during periods of energy uncertainty.

Suggested Citation

  • Huthaifa Sameeh Alqaralleh & Ahmad Al-Saraireh & Alessandra Canepa, 2021. "Energy Market Risk Management under Uncertainty: A VaR Based on Wavelet Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 11(5), pages 130-137.
    • Handle: RePEc:eco:journ2:2021-05-17
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    References listed on IDEAS

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    More about this item

    Keywords

    VaR Based on Wavelet Approach; Energy market; Uncertainty;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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