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Tail risk connectedness in clean energy and oil financial market

Author

Listed:
  • Matteo Foglia

    (“Aldo Moro” University of Bari
    “G.d’Annunzio” University of Pescara)

  • Eliana Angelini

    (“G.d’Annunzio” University of Pescara)

  • Toan Luu Duc Huynh

    (University of Southampton)

Abstract

This research investigates the connectedness and the tail risk spillover between clean energy and oil firms, from January 2011 to October 2021. To this, we use the Tail-Event driven NETworks (TENET) risk model. This approach allows for a measurement of the dynamics of tail-risk spillover for each sector and firm. Hence, we can provide a detailed picture of the existing extreme relationships within these markets. We find that the total connection between the markets varies during the period analysed, showing how the uncertainty in oil price plays a critical role in the risk dynamics for oil companies. Also, we find that relationships between energy firms tend to be intrasectoral; that is, each sector receives (emits) risk from (to) itself. These results can have important practical implications for risk management and policymakers.

Suggested Citation

  • Matteo Foglia & Eliana Angelini & Toan Luu Duc Huynh, 2024. "Tail risk connectedness in clean energy and oil financial market," Annals of Operations Research, Springer, vol. 334(1), pages 575-599, March.
    • Handle: RePEc:spr:annopr:v:334:y:2024:i:1:d:10.1007_s10479-022-04745-w
    DOI: 10.1007/s10479-022-04745-w
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    References listed on IDEAS

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    More about this item

    Keywords

    Clean energy firms; Oil firms; Tail risk spillover; Interconnectedness; Spillover network;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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