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Time and frequency connectedness among oil shocks, electricity and clean energy markets

Author

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  • Naeem, Muhammad Abubakr
  • Peng, Zhe
  • Suleman, Mouhammed Tahir
  • Nepal, Rabindra
  • Shahzad, Syed Jawad Hussain

Abstract

This paper examines the time and frequency connectedness among electricity, carbon and clean energy markets, and oil price demand and supply shocks. In doing so, we use the spillover method proposed by Diebold and Yilmaz (2012) and its extension in the frequency domain by Baruník and Křehlík (2018). We find increased connectedness during the global financial crisis as well as in the shale oil revolution period. The total connectedness is also higher in the short-run compared to the long-run. Due to their low connectedness, electricity futures can act as a risk diversifier and safe-haven asset against oil shocks. Net pairwise directional connectedness among oil shocks and the clean energy index is higher during the shale oil revolution. These results have important implications for investors with different investment time horizons.

Suggested Citation

  • Naeem, Muhammad Abubakr & Peng, Zhe & Suleman, Mouhammed Tahir & Nepal, Rabindra & Shahzad, Syed Jawad Hussain, 2020. "Time and frequency connectedness among oil shocks, electricity and clean energy markets," Energy Economics, Elsevier, vol. 91(C).
    • Handle: RePEc:eee:eneeco:v:91:y:2020:i:c:s0140988320302541
    DOI: 10.1016/j.eneco.2020.104914
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    More about this item

    Keywords

    Electricity market; Oil shocks; Carbon price; Clean energy; Time and frequency connectedness;
    All these keywords.

    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
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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