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Assessing the impact of renewable energy tokens on BRICS stock markets: A new diversification approach

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  • Ali, Shoaib
  • Umar, Muhammad
  • Naveed, Muhammad
  • Shan, Shan

Abstract

The key concern of this study is to investigate the nexus between the BRICS equity market and renewable energy tokens. Based on TVP-VAR, we examine the static and dynamic connectedness between our variables of interest. In addition to connectedness, we have also determined the diversification potential of renewable energy tokens using the DCC-GARCH model. The results infer that the connectedness between renewable energy tokens and the BRICS market remains substantial. However, it became more apmlified during COVID-19. Particularly, our findings show that BRICS equity markets act as transmitters while renewable energy tokens function as net receivers of return spillover within the system examined. Additionally, our findings infer that the inclusion of renewable energy tokens offers portfolio diversification benefits to investors in the BRICS region. However, during troublesome times, renewable energy sources provide hedging and compensate the investor's exposure to the higher level of uncertainty. Wrapping up, our findings hold indispensable guidance for investors, portfolio managers, and policy analysts.

Suggested Citation

  • Ali, Shoaib & Umar, Muhammad & Naveed, Muhammad & Shan, Shan, 2024. "Assessing the impact of renewable energy tokens on BRICS stock markets: A new diversification approach," Energy Economics, Elsevier, vol. 134(C).
    • Handle: RePEc:eee:eneeco:v:134:y:2024:i:c:s0140988324002317
    DOI: 10.1016/j.eneco.2024.107523
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    Cited by:

    1. Umar, Zaghum & Usman, Muhammad & Umar, Muhammad & Ktaish, Farah, 2024. "Interdependencies and risk management strategies between green cryptocurrencies and traditional energy sources," Energy Economics, Elsevier, vol. 136(C).

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    More about this item

    Keywords

    Static and dynamic connectedness; Energy tokens; BRICS; Portfolio diversification; Optimal weights;
    All these keywords.

    JEL classification:

    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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