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Does climate policy uncertainty affect expected shortfall (and Value-at-Risk) in the Chinese sector? Evidence from the mixed-frequency dynamic semi-parametric approach

Author

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  • Jiang, Kunliang
  • Luo, Pengfei
  • Gan, Wenxiao
  • Song, Jiashan
  • Wang, Yuejing

Abstract

Climate policy uncertainty (CPU) increases risks across sectors by affecting the economic environment, stock price volatility, corporate transformations, and investor confidence. However, incorporating such low-frequency information into sector risk assessments remains insufficiently addressed. This study combines the GARCH-MIDAS model with the Fissler–Ziegel (FZ) loss function to jointly model Value-at-Risk (VaR) and expected shortfall (ES), and explores the heterogeneous impact of CPU on risk measures across eleven sectors from 1 January 2008 to 31 December 2022 in China. Our findings indicate that CPU positively affects the VaR and ES in five sectors: energy, material, industry, consumer discretionary, and utility, while negatively impacting six sectors: consumer staple, healthcare, information technology, telecommunication service, real estate, and finance. The effect of CPU on the VaR and ES in the energy and material sectors demonstrates strong long memory, whereas the impact on telecommunication service is the opposite. Incorporating CPU into the model significantly improves the accuracy of sector risk measures across various risk levels, while the FZ loss function method provides effective risk measurement results primarily under extreme risk conditions.

Suggested Citation

  • Jiang, Kunliang & Luo, Pengfei & Gan, Wenxiao & Song, Jiashan & Wang, Yuejing, 2026. "Does climate policy uncertainty affect expected shortfall (and Value-at-Risk) in the Chinese sector? Evidence from the mixed-frequency dynamic semi-parametric approach," The North American Journal of Economics and Finance, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:ecofin:v:81:y:2026:i:c:s1062940825001950
    DOI: 10.1016/j.najef.2025.102555
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    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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