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The propagation effect of climate risks on global stock markets: Evidence from the time and space domains

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  • Yin, Libo
  • Cao, Hong

Abstract

This study delves into the propagation effect of climate risks on global stock markets, emphasizing the dynamics of contagion. We first trace the contagion pathway of climate risks across global stock markets, revealing an initial diffusion to Asian markets, followed by European markets, and ultimately reaching American markets. The HSI (Hong Kong, China), DAX (Germany), and SZ (China) markets emerge as pivotal nodes for the indirect transmission of overall climate risk. Additionally, we scrutinize the propagation dynamics of climate risks across varying timescales, noting a heightened magnitude and swifter pace at short-timescale compared to the long-timescale. Lastly, we conduct a comparative analysis of the propagation impact of distinct types of climate risks, identifying drought and precipitation risks as exerting a more pronounced influence on stock markets, both in terms of propagation speed and magnitude, relative to temperature risks.

Suggested Citation

  • Yin, Libo & Cao, Hong, 2024. "The propagation effect of climate risks on global stock markets: Evidence from the time and space domains," Energy Economics, Elsevier, vol. 132(C).
    • Handle: RePEc:eee:eneeco:v:132:y:2024:i:c:s0140988324001531
    DOI: 10.1016/j.eneco.2024.107445
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    2. Liu, Yike & Xu, Zihan & Xing, Xiaoyun & Zhu, Yuxuan, 2024. "Can Chinese investors manage climate risk domestically and globally?," International Review of Economics & Finance, Elsevier, vol. 96(PB).
    3. Lee, Chien-Chiang & Xuan, Chengnan & Wang, Fuhao & Wang, Keying, 2024. "Path analysis of green finance on energy transition under climate change," Energy Economics, Elsevier, vol. 139(C).
    4. Zhu, Yuxuan & Liu, Yike & Zhou, Ye & Xing, Xiaoyun & Wang, Xiuya, 2025. "Correlation among climate risk, climate policy uncertainty, and carbon-intensive stock markets in China," Finance Research Letters, Elsevier, vol. 75(C).
    5. Mingyu Shu & Baoliu Liu & Jieli Wang & Yujie Huang, 2025. "How Climate Shocks Affect Stock Market Risk Spillovers: Evidence from Causal Forest Algorithm," Computational Economics, Springer;Society for Computational Economics, vol. 66(5), pages 4417-4449, November.
    6. Nouha Belmahi & Khaoula Jabari, 2025. "Climate Risks and Financial Markets: A Narrative Literature Review [Risques climatiques et marchés financiers : une revue narrative de la littérature]," Post-Print hal-05012159, HAL.

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