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Dynamic Linkages among Carbon, Energy and Financial Markets: Multiplex Recurrence Network Approach

Author

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  • Minggang Wang

    (School of Mathematical Science, Jiangsu University, Zhenjiang 212000, China
    School of Mathematical Science, Nanjing Normal University, Nanjing 210042, China
    Department of Mathematics, Nanjing Normal University Taizhou College, Taizhou 225300, China)

  • Chenyu Hua

    (School of Mathematical Science, Jiangsu University, Zhenjiang 212000, China)

  • Hua Xu

    (Department of Mathematics, Nanjing Normal University Taizhou College, Taizhou 225300, China)

Abstract

It has become a hot issue to integrate the carbon market, energy market, and financial market into one system and explore the relationship among them. Considering that the carbon market, energy market, and financial market all have chaotic characteristics to varying degrees, this paper proposes a theoretical framework to study the linkage relationship among the three markets on the basis of the method of the Multiplex recurrence network. Firstly, we built a multiplex recurrence network of carbon-energy-financial market. Then, based on the connection relationship among nodes of the recurrence network of each market, the degree distribution of nodes of each market, and the information entropy theory, we put forward several metric indicators to explore the correlativity and mutual guidance relation among carbon market, energy market and financial market from micro and macro perspectives. Using the data generated by the deterministic system, the effectiveness of the defined index was confirmed by numerical simulation. The empirical analysis of the carbon market, energy market, and financial market revealed the evolution process of the increasingly close connection between the three markets, and we found that the carbon market plays an increasingly important role in the world capital market system. Based on the research results, we propose some suggestions for market decision-makers, enterprises, and investors.

Suggested Citation

  • Minggang Wang & Chenyu Hua & Hua Xu, 2022. "Dynamic Linkages among Carbon, Energy and Financial Markets: Multiplex Recurrence Network Approach," Mathematics, MDPI, vol. 10(11), pages 1-23, May.
    • Handle: RePEc:gam:jmathe:v:10:y:2022:i:11:p:1829-:d:824644
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