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Energy, metals, market uncertainties, and ESG stocks: Analysing predictability and safe havens

Author

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  • Yang, Junhua
  • Agyei, Samuel Kwaku
  • Bossman, Ahmed
  • Gubareva, Mariya
  • Marfo-Yiadom, Edward

Abstract

To address ESG stock susceptibility to episodic shocks in financial markets, we use nonparametric quantile-based techniques applied to the 2014–2022 period. We (i) analyse the ability of traditional assets to predict ESG stocks returns, (ii) explore whether oil or gold serves as a safe haven for ESG stocks, and (iii) ascertain how ESG stocks respond to market sentiment, crypto-based uncertainty, and geopolitical risk (GPR). We find that gold, oil, market sentiment (tracked by the VIX), the implied volatility of crude oil (OVX) and GPR are significant predictors of ESG returns. None of gold or oil serves as a safe haven for ESG stocks, both acting just as diversifiers. In their turn, ESG could stocks hedge against the shocks from GPR and cryptocurrency-triggered market uncertainties in bearish states of the market. These findings are important for asset allocation and risk management, assisting investors in the already ongoing switch from ordinary to sustainable investments.

Suggested Citation

  • Yang, Junhua & Agyei, Samuel Kwaku & Bossman, Ahmed & Gubareva, Mariya & Marfo-Yiadom, Edward, 2024. "Energy, metals, market uncertainties, and ESG stocks: Analysing predictability and safe havens," The North American Journal of Economics and Finance, Elsevier, vol. 69(PB).
    • Handle: RePEc:eee:ecofin:v:69:y:2024:i:pb:s1062940823001535
    DOI: 10.1016/j.najef.2023.102030
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    More about this item

    Keywords

    ESG stocks; Geopolitical risk; Cryptocurrency environmental attention; Predictability; Safe haven; Hedge;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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