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Measuring Tail Dependencies Between ESG and Renewable Energy Stocks: A Copula Approach

In: ESG Investment in the Global Economy

Author

Listed:
  • Xie He

    (Kobe University)

  • Guizhou Liu

    (Beijing Dajia Internet Information Technology Co., Ltd.)

  • Shigeyuki Hamori

    (Kobe University)

Abstract

As a sustainable and responsible investment (SRI), this research aims to measure the tail dependencies between investment in companies that have the highest environmental, social, and governance (ESG) rated performance and renewable energy companies based on the copula approach, which is crucial to monitoring systemic and extreme risks between two assets. Meanwhile, we evaluate whether renewable energy stock investors can effectively increase their portfolio performance by constructing a portfolio with the best ESG companies. The results reveal that tail dependence between ESG stocks and renewable energy stocks had been volatile during most periods. However, the strengthening trend could also be found when some extreme events occurred. On the other hand, we found that ESG stocks can effectively benefit renewable energy stock portfolios by improving risk-adjusted returns and lowering the standard deviation, value-at-risk (VaR), and conditional value-at-risk (CVaR).

Suggested Citation

  • Xie He & Guizhou Liu & Shigeyuki Hamori, 2021. "Measuring Tail Dependencies Between ESG and Renewable Energy Stocks: A Copula Approach," SpringerBriefs in Economics, in: ESG Investment in the Global Economy, chapter 0, pages 37-52, Springer.
    • Handle: RePEc:spr:spbchp:978-981-16-2990-7_3
    DOI: 10.1007/978-981-16-2990-7_3
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    Cited by:

    1. Lu, Xunfa & Huang, Nan & Mo, Jianlei & Ye, Zhitao, 2023. "Dynamics of the return and volatility connectedness among green finance markets during the COVID-19 pandemic," Energy Economics, Elsevier, vol. 125(C).
    2. Zhang, Wenting & He, Xie & Hamori, Shigeyuki, 2022. "Volatility spillover and investment strategies among sustainability-related financial indexes: Evidence from the DCC-GARCH-based dynamic connectedness and DCC-GARCH t-copula approach," International Review of Financial Analysis, Elsevier, vol. 83(C).

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