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Nonlinear impact of climate transition risks on green stock performance: Perspectives from multiscale and lag effects

Author

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  • Wang, Junling
  • Cheng, Siyu
  • Rong, Xueyun
  • Xu, Xin

Abstract

This study presents a novel examination of how climate transition risks, temperature variances, and the international crude oil market influence green stock performance in China. Utilizing signal decomposition and distributed lag nonlinear regression models on data from July 29, 2015, to June 30, 2022, we uncover a unique nonlinear and time-lagged relationship between climate risks and green stock returns. Our findings reveal that green stocks respond differently to climate and oil price changes under various market conditions, with long-term trends more affected than short-term movements. This highlights the critical role of temporal factors in financial analyses of climate-related risks and suggests that climate policies and market dynamics significantly shape investment and corporate strategies over time. The study offers fresh insights into green stock dynamics, stressing the need for nuanced understanding in financial decision-making amidst climate change and market volatility.

Suggested Citation

  • Wang, Junling & Cheng, Siyu & Rong, Xueyun & Xu, Xin, 2024. "Nonlinear impact of climate transition risks on green stock performance: Perspectives from multiscale and lag effects," International Review of Financial Analysis, Elsevier, vol. 94(C).
    • Handle: RePEc:eee:finana:v:94:y:2024:i:c:s1057521924002011
    DOI: 10.1016/j.irfa.2024.103269
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    2. 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.
    3. Zhang, Yinglong & Li, Songsong & Zhu, Xiaoqian, 2025. "Climate risk attention and nonlinear stock market responses: Evidence from an emerging market," Finance Research Letters, Elsevier, vol. 85(PA).
    4. Ting Wang & Chi‐Wei Su & Hsuling Chang & Oana‐Ramona Lobonţ, 2026. "Green Finance Under Climate Risks: A Comparative Analysis of Hedging Effects Between Green Bonds and Green Stocks," Australian Economic Papers, Wiley Blackwell, vol. 65(1), pages 83-93, March.

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