IDEAS home Printed from https://ideas.repec.org/a/eee/juipol/v90y2024ics0957178724001061.html

Is the U.S. energy independence and Security Act of 2022 associated with stock market volatility?

Author

Listed:
  • Rajendran, Hiridik
  • Kayal, Parthajit
  • Maiti, Moinak

Abstract

This study investigates the influence of the U.S. Energy Independence and Security Act (EISA) of 2022 on stock market volatility. Considering potential policy impacts on market dynamics, it employs a mean-reverting jump-diffusion model for volatility analysis, supported by rigorous hypothesis testing to validate empirical findings. For investor sentiment analysis, a pre-trained model (BERT-base-multilingual-uncased) is used to assess sentiment, with logistic regression and Bidirectional LSTM utilized for sentiment prediction. Contrary to conventional findings, logistic regression outperforms Bidirectional LSTM for the small dataset. Overall, the study estimates show no statistically noteworthy difference in volatility before and after implementing the EISA of 2022. This study provides valuable insights for navigating financial decisions within the intricate landscape of energy markets.

Suggested Citation

  • Rajendran, Hiridik & Kayal, Parthajit & Maiti, Moinak, 2024. "Is the U.S. energy independence and Security Act of 2022 associated with stock market volatility?," Utilities Policy, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:juipol:v:90:y:2024:i:c:s0957178724001061
    DOI: 10.1016/j.jup.2024.101813
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0957178724001061
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jup.2024.101813?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Karkowska, Renata & Urjasz, Szczepan, 2023. "How does the Russian-Ukrainian war change connectedness and hedging opportunities? Comparison between dirty and clean energy markets versus global stock indices," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 85(C).
    2. Benkraiem, Ramzi & Lahiani, Amine & Miloudi, Anthony & Shahbaz, Muhammad, 2018. "New insights into the US stock market reactions to energy price shocks," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 56(C), pages 169-187.
    3. Chen, Rongda & Wang, Shengnan & Ye, Mengya & Jin, Chenglu & Ren, He & Chen, Shu, 2022. "Cross-Market Investor Sentiment of Energy Futures and Return Comovements," Finance Research Letters, Elsevier, vol. 49(C).
    4. Nomikos, Nikos K. & Soldatos, Orestes A., 2010. "Analysis of model implied volatility for jump diffusion models: Empirical evidence from the Nordpool market," Energy Economics, Elsevier, vol. 32(2), pages 302-312, March.
    5. Zhu, Zhaobo & Ji, Qiang & Sun, Licheng & Zhai, Pengxiang, 2020. "Oil price shocks, investor sentiment, and asset pricing anomalies in the oil and gas industry," International Review of Financial Analysis, Elsevier, vol. 70(C).
    6. Kocaarslan, Baris & Soytas, Ugur, 2021. "Reserve currency and the volatility of clean energy stocks: The role of uncertainty," Energy Economics, Elsevier, vol. 104(C).
    7. Ma, Yilin & Wang, Yudong & Wang, Weizhong & Zhang, Chong, 2023. "Portfolios with return and volatility prediction for the energy stock market," Energy, Elsevier, vol. 270(C).
    8. Qadan, Mahmoud & Nama, Hazar, 2018. "Investor sentiment and the price of oil," Energy Economics, Elsevier, vol. 69(C), pages 42-58.
    9. JEBABLI, Ikram & KOUAISSAH, Noureddine & AROURI, Mohamed, 2022. "Volatility Spillovers between Stock and Energy Markets during Crises: A Comparative Assessment between the 2008 Global Financial Crisis and the Covid-19 Pandemic Crisis," Finance Research Letters, Elsevier, vol. 46(PA).
    10. Jin, Yi & Zhao, Hang & Bu, Lin & Zhang, Dayong, 2023. "Geopolitical risk, climate risk and energy markets: A dynamic spillover analysis," International Review of Financial Analysis, Elsevier, vol. 87(C).
    11. Lorente, Daniel Balsalobre & Mohammed, Kamel Si & Cifuentes-Faura, Javier & Shahzad, Umer, 2023. "Dynamic connectedness among climate change index, green financial assets and renewable energy markets: Novel evidence from sustainable development perspective," Renewable Energy, Elsevier, vol. 204(C), pages 94-105.
    12. Chen, Rongda & Wei, Bo & Jin, Chenglu & Liu, Jia, 2021. "Returns and volatilities of energy futures markets: Roles of speculative and hedging sentiments," International Review of Financial Analysis, Elsevier, vol. 76(C).
    13. Olson, Eric & J. Vivian, Andrew & Wohar, Mark E., 2014. "The relationship between energy and equity markets: Evidence from volatility impulse response functions," Energy Economics, Elsevier, vol. 43(C), pages 297-305.
    14. Maiti, Moinak, 2022. "Does improvement in green growth influence the development of environmental related technology?," Innovation and Green Development, Elsevier, vol. 1(2).
    15. Zhu, Bo & Hu, Xin & Deng, Yuanyue & Zhang, Bokai & Li, Xiru, 2023. "The differential effects of climate risks on non-fossil and fossil fuel stock markets: Evidence from China," Finance Research Letters, Elsevier, vol. 55(PB).
    16. Song, Yingjie & Ji, Qiang & Du, Ya-Juan & Geng, Jiang-Bo, 2019. "The dynamic dependence of fossil energy, investor sentiment and renewable energy stock markets," Energy Economics, Elsevier, vol. 84(C).
    17. Gu, Qinen & Li, Shaofang & Tian, Sihua & Wang, Yuyouting, 2023. "Climate, geopolitical, and energy market risk interconnectedness: Evidence from a new climate risk index," Finance Research Letters, Elsevier, vol. 58(PB).
    18. Ding Du & Ronald J Gunderson & Xiaobing Zhao, 2016. "Investor sentiment and oil prices," Journal of Asset Management, Palgrave Macmillan, vol. 17(2), pages 73-88, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dou, Junyi & Li, Kun & Qin, Meng & Albu, Lucian Liviu, 2025. "Towards energy security: Could renewable energy endure uncertainties in the energy market?," Economic Analysis and Policy, Elsevier, vol. 86(C), pages 461-474.
    2. Su, Chi-Wei & Wu, Ying & Qin, Meng, 2025. "Preserving energy security: Can renewable energy withstand the energy-related uncertainty risk?," Energy, Elsevier, vol. 320(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hu, Zinan & Borjigin, Sumuya, 2024. "The amplifying role of geopolitical Risks, economic policy Uncertainty, and climate risks on Energy-Stock market volatility spillover across economic cycles," The North American Journal of Economics and Finance, Elsevier, vol. 71(C).
    2. Adeabah, David & Pham, Thu Phuong, 2025. "Asymmetric tail risk spillover and co-movement between climate risk and the international energy market," Energy Economics, Elsevier, vol. 141(C).
    3. Jean-Michel Sahut & Petr Hajek & Vladimir Olej & Lubica Hikkerova, 2025. "The role of news-based sentiment in forecasting crude oil price during the Covid-19 pandemic," Annals of Operations Research, Springer, vol. 345(2), pages 861-884, February.
    4. Jin Chen & Yue Chen & Wei Zhou, 2024. "Relation exploration between clean and fossil energy markets when experiencing climate change uncertainties: substitutes or complements?," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 11(1), pages 1-17, December.
    5. Hu, Lei & Song, Min & Wen, Fenghua & Zhang, Yun & Zhao, Yunning, 2025. "The impact of climate attention on risk spillover effect in energy futures markets," Energy Economics, Elsevier, vol. 141(C).
    6. Yan, Wan-Lin & Cheung, Adrian (Wai Kong), 2025. "Quantile connectedness among climate policy uncertainty, news sentiment, oil and renewables in China," Research in International Business and Finance, Elsevier, vol. 76(C).
    7. Yahya, Farzan & Lee, Chien-Chiang, 2025. "Unveiling the multifaceted role of climate readiness in stabilizing renewables integration: Evidence of energy transition dynamics from a multi-theoretical perspective," Renewable Energy, Elsevier, vol. 248(C).
    8. Abid, Ilyes & BenMabrouk, Houda & Guesmi, Khaled & Mansour, Abir, 2025. "The clout of happiness and uncertainty in the environmental transition: Insights from CO2 and clean energy dynamic spillovers," Research in International Business and Finance, Elsevier, vol. 74(C).
    9. Deng, Xiang & Xu, Fang, 2024. "Connectedness between international oil and China's new energy industry chain: A time-frequency analysis based on TVP-VAR model," Energy Economics, Elsevier, vol. 140(C).
    10. Ghaemi Asl, Mahdi & Ben Jabeur, Sami, 2024. "Could the Russia-Ukraine war stir up the persistent memory of interconnectivity among Islamic equity markets, energy commodities, and environmental factors?," Research in International Business and Finance, Elsevier, vol. 69(C).
    11. Zhang, Jinjun & Usman, Muhammad, 2025. "Redefining energy policy for sustainable growth: The interplay of fossil fuel subsidies, energy security risks, and energy balances in shaping geopolitical stability," Energy, Elsevier, vol. 322(C).
    12. Muhammad Kashif & Thomas Leirvik, 2022. "The MAX Effect in an Oil Exporting Country: The Case of Norway," JRFM, MDPI, vol. 15(4), pages 1-16, March.
    13. Mohamed Sahbi Nakhli & Khaled Mokni & Manel Youssef, 2025. "Time‐varying causality between investor sentiment and oil price: Does uncertainty matter?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 30(1), pages 369-381, January.
    14. Naeem, Muhammad Abubakr & Arfaoui, Nadia, 2023. "Exploring downside risk dependence across energy markets: Electricity, conventional energy, carbon, and clean energy during episodes of market crises," Energy Economics, Elsevier, vol. 127(PB).
    15. To Trung Thanh & Le Thanh Ha, 2025. "An application of a R2 dcomposed linkage method to explore a comtemporal and lead connectedness between investor sentiment and exchange rate dynamics in vietnam," Quality & Quantity: International Journal of Methodology, Springer, vol. 59(1), pages 231-259, February.
    16. Dong, Kangyin & Yang, Senmiao & Wang, Jianda & Nepal, Rabindra & Jamasb, Tooraj, 2024. "Does Geopolitical Risk Accelerate Climate Vulnerability? New Evidence from the European Green Deal," Working Papers 15-2024, Copenhagen Business School, Department of Economics.
    17. Liu, Jiahao & Zhu, Bo & Hu, Xin, 2024. "Systemic risk spillovers among global energy firms: Does geopolitical risk matter?," Energy Economics, Elsevier, vol. 140(C).
    18. Dunbar, Kwamie & Treku, Daniel N., 2025. "Do energy transition investment flows aid climate commitments?," Energy Economics, Elsevier, vol. 142(C).
    19. Idilbi-Bayaa, Yasmeen & Qadan, Mahmoud, 2022. "What the current yield curve says, and what the future prices of energy do," Resources Policy, Elsevier, vol. 75(C).
    20. Saif-Alyousfi, Abdulazeez Y.H., 2025. "Energy shocks and stock market returns under COVID-19: New insights from the United States," Energy, Elsevier, vol. 316(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:juipol:v:90:y:2024:i:c:s0957178724001061. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.sciencedirect.com/journal/utilities-policy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.