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Connectedness network and dependence structure mechanism in green investments

Author

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  • Lundgren, Amanda Ivarsson
  • Milicevic, Adriana
  • Uddin, Gazi Salah
  • Kang, Sang Hoon

Abstract

We present an empirical study of renewable energy stock returns and their relation to four major investment asset classes—stocks, currency, US Treasury bonds, and oil—and several sources of uncertainty. Applying nonlinear causality and connectedness network analysis on data covering the period 2004–2016, we investigate the directionality and connectedness among different asset classes, as well as between uncertainties. First, from the results of the estimation of directionality and network spillovers, it can be concluded that the European stock market has a strong market dependence on renewable energy stock prices. Second, uncertainties have an economically significant impact on both return and volatility spillover in energy investments. Third, most of the uncertainties are net transmitters of volatility connectedness during the global financial crisis (GFC) and European sovereign debt crisis (ESDC).

Suggested Citation

  • Lundgren, Amanda Ivarsson & Milicevic, Adriana & Uddin, Gazi Salah & Kang, Sang Hoon, 2018. "Connectedness network and dependence structure mechanism in green investments," Energy Economics, Elsevier, vol. 72(C), pages 145-153.
  • Handle: RePEc:eee:eneeco:v:72:y:2018:i:c:p:145-153
    DOI: 10.1016/j.eneco.2018.04.015
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    References listed on IDEAS

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    1. repec:gam:jsusta:v:10:y:2018:i:9:p:3298-:d:169990 is not listed on IDEAS
    2. repec:eee:finana:v:59:y:2018:i:c:p:117-133 is not listed on IDEAS

    More about this item

    Keywords

    Renewable energy; Non-renewable energy; Uncertainty; Causality; Connectedness network;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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