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Does market sentiment and global uncertainties influence ESG-oil nexus? A time-frequency analysis

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  • Bhattacherjee, Purba
  • Mishra, Sibanjan
  • Kang, Sang Hoon

Abstract

This study investigates the influence of market sentiment and global uncertainties on the ESG-oil nexus for ten developed and eleven emerging countries from 4/1/2016 to 1/31/2023. Using bi-variate, partial and multiple wavelet coherence analysis, this study finds some insightful results: First, the ESG-oil nexus shows higher coherency, specifically during the health crisis period of COVID-19. Second, there is a diffusion of coherency between the networks, while controlling market sentiment (VIX and OVX) and global risks (EPU and OFR-FSI). Lastly, we find that the interaction effect of oil and uncertainties intensified the coherency. These results signal that market sentiment and global uncertainties are significant drivers influencing the ESG-oil nexus. The findings are important from a portfolio management and risk diversification perspective.

Suggested Citation

  • Bhattacherjee, Purba & Mishra, Sibanjan & Kang, Sang Hoon, 2023. "Does market sentiment and global uncertainties influence ESG-oil nexus? A time-frequency analysis," Resources Policy, Elsevier, vol. 86(PA).
    • Handle: RePEc:eee:jrpoli:v:86:y:2023:i:pa:s0301420723008413
    DOI: 10.1016/j.resourpol.2023.104130
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    More about this item

    Keywords

    ESG; Wavelet coherence; Oil price; Economic political uncertainty; Financial stress index; Volatility index;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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