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Dynamic and asymmetric connectedness in the global “Carbon-Energy-Stock” system under shocks from exogenous events

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  • Yang, Ming-Yuan
  • Chen, Zhanghangjian
  • Liang, Zongzheng
  • Li, Sai-Ping

Abstract

In this paper, by using the time-varying parameter vector autoregression model (TVP-VAR) with the asymmetric connectedness indicator and network diagrams, we investigate the dynamic and asymmetric return connectedness in the global “Carbon-Energy-Stock” system, including carbon markets and stock markets of the three largest economies, namely the United States, European Union and China, and fossil energies of crude oil and natural gas under exogenous shocks. Our study shows that (i) the risk spillover level of the global system has significantly increased after the outbreak of two exogenous events, the COVID-19 pandemic and the Russo-Ukrainian war, and the global shock from the COVID-19 pandemic has more widespread and greater impact on the system than the geopolitical shock from the Russo-Ukrainian war, (ii) the global “Carbon-Energy-Stock” system is more sensitive to negative information on price returns than positive information, and the asymmetry of the connectedness is much larger when the system is active and in the presence of exogenous shocks, (iii) risks in the global “Carbon-Energy-Stock” system usually transformed from stock markets, especially the stock markets of the United States and European Union, to the carbon markets. These findings provide valuable guidance and have economic implications for both investors and policymakers worldwide.

Suggested Citation

  • Yang, Ming-Yuan & Chen, Zhanghangjian & Liang, Zongzheng & Li, Sai-Ping, 2023. "Dynamic and asymmetric connectedness in the global “Carbon-Energy-Stock” system under shocks from exogenous events," Journal of Commodity Markets, Elsevier, vol. 32(C).
  • Handle: RePEc:eee:jocoma:v:32:y:2023:i:c:s2405851323000569
    DOI: 10.1016/j.jcomm.2023.100366
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    More about this item

    Keywords

    Carbon markets; Global system; Dynamic connectedness; Asymmetric connectedness; Exogenous shocks;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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