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Sentiments and risks: A spillover tale under climate policy uncertainty

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  • Huang, Yingying
  • Liang, Weizhong
  • Duan, Kun
  • Parhi, Mamata
  • Mishra, Tapas

Abstract

The investor psyche that finds expression in sentiments has been centralized given its crucial spillovers with risk perceptions, eliciting clear interpretation of the spillover impact and its dynamics under the ongoing climate vulnerability. This paper analyzes the time-varying industrial spillover between sentiments and risks, and its asymmetric evolutions when facing climate policy uncertainty (CPU). Our results, drawn based on a historical dataset in the U.S., show that the risk of technology sector and the sentiment of financial sector are the two largest information providers. Sectors related to the real economy are found to be the greatest information receivers. Moreover, sectoral spillovers are less affected by CPU in normal market conditions but are influenced with a larger magnitude during extreme periods. Dirty and clean sectors exhibit similar roles in forming the spillover, while their roles show distinct responses when facing shocks to CPU. Our findings for the dynamic spillovers of sentiments and risks should be of interest to various stakeholders toward financial stability and green transition.

Suggested Citation

  • Huang, Yingying & Liang, Weizhong & Duan, Kun & Parhi, Mamata & Mishra, Tapas, 2026. "Sentiments and risks: A spillover tale under climate policy uncertainty," Energy Economics, Elsevier, vol. 154(C).
    • Handle: RePEc:eee:eneeco:v:154:y:2026:i:c:s0140988325009314
    DOI: 10.1016/j.eneco.2025.109101
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