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Contagion network of idiosyncratic volatility: Does corporate environmental responsibility matter?

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  • Liao, Gaoke
  • Li, Yanling
  • Wang, Mengxin

Abstract

This study seeks to explore the impact of corporate environmental responsibility (CER) on idiosyncratic volatility contagion. We first adopt the general dynamic factor model to extract the idiosyncratic volatility. The long-term variance decomposition network is then constructed to examine the contributions of CER the contagion network of idiosyncratic volatility. The results demonstrate that idiosyncratic volatility contagion between sectors will be significantly strengthened during the stock market instability. CER play important role in the idiosyncratic volatility contagion, it will change the contagion ability and direction of idiosyncratic volatility during the stock market instability.

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  • Liao, Gaoke & Li, Yanling & Wang, Mengxin, 2024. "Contagion network of idiosyncratic volatility: Does corporate environmental responsibility matter?," Energy Economics, Elsevier, vol. 129(C).
    • Handle: RePEc:eee:eneeco:v:129:y:2024:i:c:s0140988323006667
    DOI: 10.1016/j.eneco.2023.107168
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    More about this item

    Keywords

    Contagion network; Idiosyncratic volatility; Generalized dynamic factor model; Corporate environmental responsibility;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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