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Assessing the impact of energy-related uncertainty on G20 stock market returns: A decomposed contemporaneous and lagged R2 connectedness approach

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  • Li, Hailing
  • Pei, Xiaoyun
  • Yang, Yimin
  • Zhang, Hua

Abstract

Combined the new metric Energy-Related Uncertainty Index (EUI) and novel Decomposed R2 Connectedness framework, with monthly dataset covers 19 G20 stock market returns from January 2004 to October 2022, this paper examines the dynamic overall, contemporaneous and lagged spillover effect between energy market and G20 stock markets. This paper has the following important and interesting conclusions: Firstly, the spillover effect of EUI and G20 stock markets are contemporaneous dominated. All the contemporaneous From and To connectedness indicators are higher than lagged connectedness except for EUI. Secondly, the spillover effect shows heterogeneity. The stock of France, the United Kingdom, and the United States are net transmitter, while China, Saudi Arabia, and EUI are the net recipient. Finally, the EUI plays a unique and subtle role in the transmission dynamics of market shocks. The multifaceted impact of EUI on the individual stock markets of the G20 has exacerbated the complexity of this interaction. Specifically, the spillover effects between the EUI and G20 stock markets are significantly affected by economic events such as global crises and technological changes. Our research is poised to offer valuable insights to investors, policymakers, and researchers alike. By delving into the specificities of the G20 context, we aim to contribute nuanced perspectives that can inform decision-making processes amidst the complexities of energy-related uncertainties in the financial landscape.

Suggested Citation

  • Li, Hailing & Pei, Xiaoyun & Yang, Yimin & Zhang, Hua, 2024. "Assessing the impact of energy-related uncertainty on G20 stock market returns: A decomposed contemporaneous and lagged R2 connectedness approach," Energy Economics, Elsevier, vol. 132(C).
    • Handle: RePEc:eee:eneeco:v:132:y:2024:i:c:s014098832400183x
    DOI: 10.1016/j.eneco.2024.107475
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    More about this item

    Keywords

    Dynamic connectedness; Energy uncertainty; G20 stock markets; R2 decomposition;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis

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