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Climate risk and Chinese stock volatility forecasting: Evidence from ESG index

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  • Wang, Jiqian
  • Li, Liang

Abstract

This study employs a generalised autoregressive conditional heteroscedasticity mixed data sampling model (GARCH-MIDAS) to explore the forecasting performance of Chinese climate uncertainty (CU), Chinese climate policy uncertainty (CEU), Chinese economic policy uncertainty (CEPU), and US climate policy uncertainty (UCU) in both CSI 300 ESG and SSEC index volatility forecasting. The empirical results indicate that CU and CEU can significantly drive CSI 300 ESG volatility and outperform CEU and UCU. This may be caused by investors paying more attention to climate risk with the advent of the ESG score.

Suggested Citation

  • Wang, Jiqian & Li, Liang, 2023. "Climate risk and Chinese stock volatility forecasting: Evidence from ESG index," Finance Research Letters, Elsevier, vol. 55(PA).
    • Handle: RePEc:eee:finlet:v:55:y:2023:i:pa:s1544612323002702
    DOI: 10.1016/j.frl.2023.103898
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    Cited by:

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    3. Wanzhen Yu & Farzan Yahya & Muhammad Umar & Muhammad Hussain, 2025. "Disaggregated Liquidity Response to Climate Risk: A Precautionary Hoarding and Flight-to-Safety Perspective," SAGE Open, , vol. 15(4), pages 21582440251, November.
    4. Zhao, Lili & Lin, Yutong & Liu, Zhenhao & Yang, Guozheng, 2026. "Examining climate risk attention in stock markets: insights from quantile-on-quantile regression," The North American Journal of Economics and Finance, Elsevier, vol. 81(C).
    5. Naseer, Mirza Muhammad & Guo, Yongsheng & Bagh, Tanveer & Zhu, Xiaoxian, 2024. "Sustainable investments in volatile times: Nexus of climate change risk, ESG practices, and market volatility," International Review of Financial Analysis, Elsevier, vol. 95(PB).
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    7. Sarker, Provash Kumer, 2025. "Nonlinear Effects of Climate Policy Uncertainty on Carbon Allowance and ESG Prices: Evidence From the US," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 6(1), pages 1-7.
    8. Naseer, Mirza Muhammad & Guo, Yongsheng & Zhu, Xiaoxian, 2025. "When climate risk hits corporate value: The moderating role of financial constraints, flexibility, and innovation," Finance Research Letters, Elsevier, vol. 74(C).
    9. Yan CHEN & Jiayi LYU & Zixuan GAO & Yanfeng LI, 2025. "Computing Ripples : How AI Computing Power Drives the Sustainable ESG Progress of Chinese Corporations," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 104-119, July.
    10. Iram Hasan & Shveta Singh & Smita Kashiramka, 2025. "Does Socially Responsible Investing Outperform Conventional Investing? A Cross-Country Perspective," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 32(4), pages 1307-1356, December.
    11. Zhu, Yao-Long & Li, Ruihan & Liu, Peipei, 2025. "Time–frequency risk spillovers between Chinese climate policy uncertainty and the stock market," Finance Research Letters, Elsevier, vol. 86(PB).
    12. Lin, Ling & Jiang, Yong & Zhou, Zhongbao, 2024. "Asymmetric spillover and network connectedness of policy uncertainty, fossil fuel energy, and global ESG investment," Applied Energy, Elsevier, vol. 368(C).
    13. Naseer, Mirza Muhammad & Guo, Yongsheng & Zhu, Xiaoxian, 2025. "The dynamics of corporate climate risk and market volatility: International evidence," The North American Journal of Economics and Finance, Elsevier, vol. 78(C).
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