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Time–frequency risk spillovers between Chinese climate policy uncertainty and the stock market

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Listed:
  • Zhu, Yao-Long
  • Li, Ruihan
  • Liu, Peipei

Abstract

Chinese Climate Policy Uncertainty (CCPU) adversely affects corporate investment efficiency, amplifying Chinese stock volatility risks. To investigate their relationships, we innovatively apply a time-varying parameter vector autoregression (TVP-VAR)-based frequency connectedness framework and construct multilayer risk spillover networks, concluding short-, medium- and long-term layers. (i) System-level analysis reveals significant bidirectional spillovers dominated by short-term frequencies. Three risk spillovers show time-varying dynamics and sensitivity to extreme events, while demonstrating strong synergistic effects. And we observe structurally unique but highly interconnected networks across three layers. (ii) Industry-level analysis shows positive risk spillovers from stocks to CCPU, especially in upstream and high-carbon industries. In stable periods, attention should be paid to industries with lower participation coefficients, as their risk spillovers are underestimated. These findings provide practical significance for regulators and investors.

Suggested Citation

  • 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).
    • Handle: RePEc:eee:finlet:v:86:y:2025:i:pb:s1544612325016897
    DOI: 10.1016/j.frl.2025.108435
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    References listed on IDEAS

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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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