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Effect of weather and environmental attentions on financial system risks: Evidence from Chinese high- and low-carbon assets

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  • Dong, Xiyong
  • Yoon, Seong-Min

Abstract

Physical and transition risks from climate change have potential impacts on financial markets. This study investigates systemic risks between high- and low-carbon assets and other sector assets and explores the effects of various weather and environmental factors on the financial systemic risks by employing the TENET and DMA models. We find that smaller results for systemic and spillover risks of high- and low-carbon assets will be obtained if weather and environmental attention are considered in the model. More importantly, weather and environmental attention influence the systemic risks of high- and low-carbon assets in different ways. Increased weather attention causes a decline (rise) in the risk spillovers of high-carbon (low-carbon) assets, while increased environmental attention leads to a rise (decline) in the risk spillovers of high-carbon (low-carbon) assets. Moreover, the impact of weather and environmental attention on systemic risks gradually weakened over time.

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  • Dong, Xiyong & Yoon, Seong-Min, 2023. "Effect of weather and environmental attentions on financial system risks: Evidence from Chinese high- and low-carbon assets," Energy Economics, Elsevier, vol. 121(C).
    • Handle: RePEc:eee:eneeco:v:121:y:2023:i:c:s0140988323001780
    DOI: 10.1016/j.eneco.2023.106680
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    More about this item

    Keywords

    Climate change; Systemic risks; Weather and environmental attentions; Different carbon footprint assets;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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