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Energy tokens and green energy markets under crisis periods: A quantile downside tail risk dependence analysis

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  • Abakah, Emmanuel Joel Aikins
  • Chowdhury, Mohammad Ashraful Ferdous
  • Abdullah, Mohammad
  • Hammoudeh, Shawkat

Abstract

This study investigates the interconnectedness between energy tokens and the green energy market, while considering portfolio implications. We analyze daily data on five energy tokens and five green energy market indices during the period from September 21, 2018, to June 9, 2023. Using the Conditional Autoregressive Value at Risk (CAViaR) and the Time-Frequency Quantile vector autoregression (TF-QVAR) approaches, we examine the dynamic spillover effects between these sectors. Our finding shows a significant tail risk connectedness between the energy tokens and the green energy in (lower and upper) extreme quantiles, whereas a low-level interconnection is found in the mid quantile. The time-frequency analysis shows several energy tokens are decoupled from the network during the COVID-19 and the Russia-Ukraine war. Furthermore, the dynamic analysis reveals a time time-varying and an event-dependent nature of connectedness, where significant upsurges and changes in the transmission role are witnessed during the COVID-19 and the Russia-Ukraine war. Additionally, we explore the portfolio benefits by employing the minimum connectedness portfolio approach and find portfolio benefits between the energy tokens and green energy portfolios over both the short-term and long-term investment horizons. The findings shed light on the insights for investors and policymakers seeking to understand the dynamics and potential benefits of these markets.

Suggested Citation

  • Abakah, Emmanuel Joel Aikins & Chowdhury, Mohammad Ashraful Ferdous & Abdullah, Mohammad & Hammoudeh, Shawkat, 2024. "Energy tokens and green energy markets under crisis periods: A quantile downside tail risk dependence analysis," International Review of Economics & Finance, Elsevier, vol. 96(PB).
    • Handle: RePEc:eee:reveco:v:96:y:2024:i:pb:s1059056024006282
    DOI: 10.1016/j.iref.2024.103636
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