IDEAS home Printed from https://ideas.repec.org/a/eee/ecofin/v76y2025ics1062940824002791.html
   My bibliography  Save this article

Identifying risk transmission in carbon, energy and metal markets: Evidence from a novel quantile frequency connectedness approach

Author

Listed:
  • Wu, Hao
  • Huang, Yuan

Abstract

The carbon, energy, and metal markets are intricately interconnected, and clarifying their relationships is crucial for promoting sustainable development. This paper explores the risk transmission mechanism of carbon, energy and metal markets, as well as portfolio diversification. The quantile frequency framework and portfolio strategy are employed. Our empirical results indicate that the spillover effect is particularly pronounced in bearish and bullish markets. The connectedness of the carbon-energy-metal system is time-varying and cyclical, with short-term effects dominating. Moreover, the metal markets, especially copper, possesses greater explanatory power, and the carbon market is becoming increasingly connected with other markets in the post-COVID-19 period. In addition, the state of market dependence suggests that energy and metals can provide a better hedge against carbon in the medium and long term. Investors are recommended to hold more metals in their portfolios rather than carbon and energy, and to adjust portfolio allocations and hedge positions in response to market situations. Overall, these findings are of great significance for investors building diversified investment and for policymakers monitoring risk contagion.

Suggested Citation

  • Wu, Hao & Huang, Yuan, 2025. "Identifying risk transmission in carbon, energy and metal markets: Evidence from a novel quantile frequency connectedness approach," The North American Journal of Economics and Finance, Elsevier, vol. 76(C).
  • Handle: RePEc:eee:ecofin:v:76:y:2025:i:c:s1062940824002791
    DOI: 10.1016/j.najef.2024.102354
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1062940824002791
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.najef.2024.102354?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 search for a different version of it.

    More about this item

    Keywords

    Carbon-energy-metal system; Risk transmission; Quantile frequency connectedness; Quantile coherency; Portfolio diversification;
    All these keywords.

    JEL classification:

    • C80 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

    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:ecofin:v:76:y:2025:i:c:s1062940824002791. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: http://www.elsevier.com/locate/inca/620163 .

    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.