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Does carbon price volatility affect European stock market sectors? A connectedness network analysis

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  • Aslan, Aydin
  • Posch, Peter N.

Abstract

We investigate how the volatility of carbon emission allowance (EUA) prices affects European stock market sectors. We employ a connectedness network analysis on prices of EUA futures and FTSE stock market sector indices and find that the EUA is mostly a net receiver of volatility connectedness and significantly receives volatility across most sectors during the recent European energy crisis.

Suggested Citation

  • Aslan, Aydin & Posch, Peter N., 2022. "Does carbon price volatility affect European stock market sectors? A connectedness network analysis," Finance Research Letters, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322004974
    DOI: 10.1016/j.frl.2022.103318
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    References listed on IDEAS

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    1. Francis X. Diebold & Kamil Yilmaz, 2009. "Measuring Financial Asset Return and Volatility Spillovers, with Application to Global Equity Markets," Economic Journal, Royal Economic Society, vol. 119(534), pages 158-171, January.
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    Cited by:

    1. Suleman, Muhammad Tahir & Rehman, Mobeen Ur & Sheikh, Umaid A. & Kang, Sang Hoon, 2023. "Dynamic time-frequency connectedness between European emissions trading system and sustainability markets," Energy Economics, Elsevier, vol. 123(C).
    2. Chao Zhang & Yihang Zhao & Huiru Zhao, 2022. "A Novel Hybrid Price Prediction Model for Multimodal Carbon Emission Trading Market Based on CEEMDAN Algorithm and Window-Based XGBoost Approach," Mathematics, MDPI, vol. 10(21), pages 1-16, November.
    3. Zhao, Lu-Tao & Liu, Hai-Yi & Chen, Xue-Hui, 2024. "How does carbon market interact with energy and sectoral stocks? Evidence from risk spillover and wavelet coherence," Journal of Commodity Markets, Elsevier, vol. 33(C).
    4. Parisa Pakrooh & Matteo Manera, 2024. "Causality, Connectedness, and Volatility Pass-through among Energy-Metal-Stock-Carbon Markets: New Evidence from the EU," Working Papers 2024.22, Fondazione Eni Enrico Mattei.

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    More about this item

    Keywords

    EU ETS; EUA; Connectedness network; Volatility spillover;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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