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High-carbon screening out: A DCC-MIDAS-climate policy risk method

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  • Ding, Hao
  • Ji, Qiang
  • Ma, Rufei
  • Zhai, Pengxiang

Abstract

This paper modifies the traditional DCC-MIDAS model by incorporating the climate policy risk to examine its effect on the correlations between high- and low-carbon assets. Our results show that the climate policy risk has a negative effect on the long-term correlations between high- and low-carbon assets, although the extent of this effect varies across different asset categories. The results of portfolio performance analyses also show that when the climate policy risk is high, the effectiveness of low-carbon assets as a hedge of carbon-intensive assets decreases, while the performance of carbon-intensive portfolios diversified by low-carbon assets improves.

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  • Ding, Hao & Ji, Qiang & Ma, Rufei & Zhai, Pengxiang, 2022. "High-carbon screening out: A DCC-MIDAS-climate policy risk method," Finance Research Letters, Elsevier, vol. 47(PA).
    • Handle: RePEc:eee:finlet:v:47:y:2022:i:pa:s1544612322001167
    DOI: 10.1016/j.frl.2022.102818
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    7. Ren, Xiaohang & Li, Jingyao & He, Feng & Lucey, Brian, 2023. "Impact of climate policy uncertainty on traditional energy and green markets: Evidence from time-varying granger tests," Renewable and Sustainable Energy Reviews, Elsevier, vol. 173(C).
    8. Salisu, Afees A. & Gupta, Rangan & Nel, Jacobus & Bouri, Elie, 2022. "The (Asymmetric) effect of El Niño and La Niña on gold and silver prices in a GVAR model," Resources Policy, Elsevier, vol. 78(C).
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    17. Poshan Yu & Haoran Xu & Jianing Chen, 2024. "Can ESG Integration Enhance the Stability of Disruptive Technology Stock Investments? Evidence from Copula-Based Approaches," JRFM, MDPI, vol. 17(5), pages 1-29, May.
    18. Zhang, Yunhan & Zhao, Yu & Zheng, Qian, 2024. "Managerial climate attention and corporate carbon emissions: Sincerity or disguise？," International Review of Economics & Finance, Elsevier, vol. 94(C).
    19. Chu, Wen-Jun & Fan, Li-Wei & Zhou, P., 2024. "Extreme spillovers across carbon and energy markets: A multiscale higher-order moment analysis," Energy Economics, Elsevier, vol. 138(C).
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    22. Zhang, Yunhan & Li, Yan & Zhao, Wanli & Ji, Qiang, 2024. "Climate risk performance and returns integration of Chinese listed energy companies," Energy Economics, Elsevier, vol. 129(C).

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