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Oil shocks and volatility of green investments: GARCH-MIDAS analyses

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  • Yaya, OlaOluwa S.
  • Ogbonna, Ahamuefula E.
  • Vo, Xuan Vinh

Abstract

This study examines how market volatility of five green investments (Standard & Poor's - S&P [Green bond select index and Green bond index] and Morgan Stanley Capital International - MSCI [Global alternative energy index, Global pollution prevention index, and Global green building index]) respond to oil shocks; using the Generalized Autoregressive Conditional Heteroscedasticity with Mixed Data Sampling (GARCH-MIDAS) modelling framework. We employ Baumeister and Hamilton's decomposed oil shocks: economic activity shocks, oil consumption demand shocks, oil inventory demand shocks, and oil supply shocks; each in their original levels, as well as their negatively and positively disaggregated levels. Our findings show homogeneous and heterogeneous responses of green investments volatility to variants of oil shocks. Asymmetry effect is also evidenced, given the differences between the estimated effect of positive and negative oil shocks on the volatility of green investments.

Suggested Citation

  • Yaya, OlaOluwa S. & Ogbonna, Ahamuefula E. & Vo, Xuan Vinh, 2022. "Oil shocks and volatility of green investments: GARCH-MIDAS analyses," Resources Policy, Elsevier, vol. 78(C).
    • Handle: RePEc:eee:jrpoli:v:78:y:2022:i:c:s0301420722002379
    DOI: 10.1016/j.resourpol.2022.102789
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    Cited by:

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    3. Yaya, OlaOluwa S. & Ogbonna, Ahamuefula E. & Adesina, Oluwaseun A. & Alobaloke, Kafayat A. & Vo, Xuan Vinh, 2022. "Time-variation between metal commodities and oil, and the impact of oil shocks: GARCH-MIDAS and DCC-MIDAS analyses," Resources Policy, Elsevier, vol. 79(C).
    4. Umar, Zaghum & Hadhri, Sinda & Abakah, Emmanuel Joel Aikins & Usman, Muhammad & Umar, Muhammad, 2024. "Return and volatility spillovers among oil price shocks and international green bond markets," Research in International Business and Finance, Elsevier, vol. 69(C).
    5. Tatyana Semenova & Juan Yair Martínez Santoyo, 2023. "Economic Strategy for Developing the Oil Industry in Mexico by Incorporating Environmental Factors," Sustainability, MDPI, vol. 16(1), pages 1-38, December.
    6. Malik, Farooq & Umar, Zaghum, 2024. "Quantile connectedness of oil price shocks with socially responsible investments," The North American Journal of Economics and Finance, Elsevier, vol. 70(C).
    7. Duan, Kun & Tan, Jinkui & Ren, Xiaohang & Taghizadeh-Hesary, Farhad, 2024. "How does green investment respond differently to decomposed oil shocks?," Resources Policy, Elsevier, vol. 92(C).
    8. Zhang, Jiaming & Xiang, Yitian & Zou, Yang & Guo, Songlin, 2024. "Volatility forecasting of Chinese energy market: Which uncertainty have better performance?," International Review of Financial Analysis, Elsevier, vol. 91(C).
    9. Liu, Chao & Xu, Jiahui, 2024. "Risk spillover effects of new global energy listed companies from the time-frequency perspective," Energy, Elsevier, vol. 292(C).
    10. Lu, Xunfa & He, Pengchao & Zhang, Zhengjun & Apergis, Nicholas & Roubaud, David, 2024. "Extreme co-movements between decomposed oil price shocks and sustainable investments," Energy Economics, Elsevier, vol. 134(C).
    11. Salisu, Afees A. & Isah, Kazeem & Oloko, Tirimisiyu O., 2024. "Technology shocks and crude oil market connection: The role of climate change," Energy Economics, Elsevier, vol. 130(C).
    12. Rehman, Mobeen Ur & Nautiyal, Neeraj & Zeitun, Rami & Vo, Xuan Vinh & Ghardallou, Wafa, 2024. "Unraveling the multiscale comovement of green bonds and structural shocks: An oil-driven analysis," The North American Journal of Economics and Finance, Elsevier, vol. 72(C).
    13. Khaskheli, Asadullah & Zhang, Hongyu & Raza, Syed Ali & Khan, Komal Akram, 2022. "Assessing the influence of news indicator on volatility of precious metals prices through GARCH-MIDAS model: A comparative study of pre and during COVID-19 period," Resources Policy, Elsevier, vol. 79(C).
    14. Tumala, Mohammed M. & Salisu, Afees A. & Gambo, Ali I., 2023. "Disentangled oil shocks and stock market volatility in Nigeria and South Africa: A GARCH-MIDAS approach," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 707-717.
    15. Su, Yun Hsuan & Rizvi, Syed Kumail Abbas & Umar, Muhammad & Chang, Hsuling, 2023. "Unveiling the relationship between oil and green bonds: Spillover dynamics and implications," Energy Economics, Elsevier, vol. 127(PA).

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    More about this item

    Keywords

    GARCH-MIDAS; Green bond; Oil shocks; Asymmetry;
    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
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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