IDEAS home Printed from https://ideas.repec.org/a/eco/journ2/v15y2024i1id17664.html

Portfolio Diversification and Dynamic Interactions between Clean and Dirty Energy Assets

Author

Listed:
  • Belkhir, Nadia

    (Imam Mohammad Ibn Saud Islamic University (IMSIU), Riyadh, Saudi Arabia)

  • Masmoudi, Wafa Kammoun

    (University of Carthage, Institute of Higher Commercial Studies of Carthage, Tunisia; & Laboratoire d'Économie et de Finance Appliquée (LEFA), Tunisia)

  • Loukil, Sahar

    (Faculty of Business and Economic Sciences, University of Sfax, Sfax, Tunisia; & Laboratoire de Recherche en Technologie d'Information, Gouvernance et Entrepreneuriat (LARTIGE), Tunisia)

  • Belguith, Rihab

    (Faculty of Business and Economic Sciences, University of Sfax, Sfax, Tunisia)

Abstract

Clean energy, with its focus on environmental sustainability and efficiency, has gained significance as concerns over the impact of traditional energy growth. However, there is limited evidence on the value of clean energy investments. This paper explores the role of clean energy in a balanced investment portfolio by examining two traditional energy assets (crude oil and natural gas) and two clean energy assets (SPDR S&P Kensho Clean Power ETF and iShares Global Clean Energy ETF). Using a time-varying parameter vector autoregression (TVP-VAR) model on daily data from October 2021 to January 2024, we analyze the evolving connectedness between these assets. Our results highlight dynamic interactions, with green finance indices like CNRG acting as net shock transmitters, while traditional energy indices, such as WTI and gas, primarily receive shocks. The analysis suggests that green assets, particularly ICLN, enhance portfolio stability and hedging efficiency, especially in minimum correlation and risk parity portfolios. Fossil fuels, especially gas, exhibit higher volatility, requiring careful portfolio management. Ultimately, integrating ESG criteria and adapting investment strategies to market conditions may enhance responsible investing and long-term value creation.

Suggested Citation

  • Belkhir, Nadia & Masmoudi, Wafa Kammoun & Loukil, Sahar & Belguith, Rihab, 2024. "Portfolio Diversification and Dynamic Interactions between Clean and Dirty Energy Assets," International Journal of Energy Economics and Policy, Econjournals, vol. 15(1), pages 519-531, December.
    • Handle: RePEc:eco:journ2:v:15:y:2024:i:1:id:17664
    DOI: 10.32479/ijeep.17664
    as

    Download full text from publisher

    File URL: https://econjournals.com/index.php/ijeep/article/download/17664/8540
    Download Restriction: no
    File URL: https://libkey.io/10.32479/ijeep.17664?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ2:v:15:y:2024:i:1:id:17664. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Monica Sinhat (email available below). General contact details of provider: https://econjournals.com/index.php/ijeep .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.