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Tail risk spillover and systemic importance among fossil energy markets: Evidence from china

Author

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  • Zheng, Huike
  • Gao, Chiyuan
  • Deng, Jing

Abstract

Understanding how risks are transferred between fossil energy markets is essential to promoting China’s sustainable growth as climate change and the energy transition shake these markets. This study uses the CoVaR approach to build a tail risk network with a focus on the fossil energy industry in China. We then use the PageRank algorithm to determine which institutions and industries within this network are systemically important. Furthermore, we look into how exogenous shocks from extreme occurrences can dynamically transmit tail risk spillovers in the market. The empirical results show that risk spillovers within China’s fossil fuel system vary over time. This study provides new insights into fossil energy markets that can assist investors in spreading investment risks and regulators in creating effective policies by examining the various risk transmission mechanisms among fossil energy markets of three crises: the COVID-19 pandemic, the Sino-US trade war, and the Russia–Ukraine conflict.

Suggested Citation

  • Zheng, Huike & Gao, Chiyuan & Deng, Jing, 2025. "Tail risk spillover and systemic importance among fossil energy markets: Evidence from china," The North American Journal of Economics and Finance, Elsevier, vol. 79(C).
    • Handle: RePEc:eee:ecofin:v:79:y:2025:i:c:s1062940825001019
    DOI: 10.1016/j.najef.2025.102461
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    More about this item

    Keywords

    Fossil energy; Tail risk spillover; Systemic importance; Extreme events;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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