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Decoding risk transmission: A higher-order moments network analysis of sustainable and traditional markets

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  • He, Yue
  • Tao, Miaomiao
  • Ren, Xiaohang

Abstract

The implications of spillovers between traditional and sustainable markets have drawn extensive attention as the world’s financial markets become more intricate and interconnected. We construct a multi-layer dynamic spillover network to characterize the risk contagion between sustainable markets (i.e., carbon, clean energy, and gas) and traditional markets (i.e., crude oil, gold, and equities). In particular, we examine the dynamic spillover characteristics across markets by leveraging higher-order moments and the DBN-LGCNET model. Our results reveal robust interconnections between the crude oil and gold markets in the higher-order moments network, whereas sustainable markets exhibit notable linkages at the skewness and kurtosis layers. Spillover relationships across different market layers display similarities and pronounced heterogeneity. These results present a fresh viewpoint for investors on portfolio diversification and risk mitigation while offering empirical evidence to aid policymakers in promoting green finance.

Suggested Citation

  • He, Yue & Tao, Miaomiao & Ren, Xiaohang, 2025. "Decoding risk transmission: A higher-order moments network analysis of sustainable and traditional markets," Research in International Business and Finance, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:riibaf:v:80:y:2025:i:c:s0275531925003411
    DOI: 10.1016/j.ribaf.2025.103085
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    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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