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How much does climate-related risk impact stock and commodity markets: A comparative study of the US and China

Author

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  • Chen, Yanhua
  • Sharma, Aarzoo

Abstract

We investigate the quantile cointegration and causal effect between climate policy uncertainty (CPU) and financial markets in the US and China from 2010 to 2021. Results indicate that CPUs impact the US and China's financial markets differently. Compared to China, US financial markets are more vulnerable to the US and China's CPU. Results also reveal multi-directional causation between CPUs and the US and China's stock markets in extreme market situations, while between CPUs and commodity markets in normal market states. Besides, China's stock markets are more sensitive to the US CPU than to China's CPU during extreme market situations.

Suggested Citation

  • Chen, Yanhua & Sharma, Aarzoo, 2024. "How much does climate-related risk impact stock and commodity markets: A comparative study of the US and China," Finance Research Letters, Elsevier, vol. 62(PA).
    • Handle: RePEc:eee:finlet:v:62:y:2024:i:pa:s1544612324001648
    DOI: 10.1016/j.frl.2024.105134
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