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Idiosyncratic and systematic spillovers through the renewable energy financial systems

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  • Marco Tedeschi

    (Department of Economics and Social Sciences, Universita' Politecnica delle Marche)

Abstract

This study examines the relationship between fossil fuels energy prices and renewable energy ETFs through a two-step approach: cointegration analysis and volatility spillover examination at both aggregate and frequency levels. Using daily closing prices from May 5, 2014, to October 31, 2023, we find evidence of cointegration among prices and a substitutedness (complementarity) relationship between fossil fuels and eolic (solar) energy. Exploring the system's common trend and correction mechanism underscores the influential role of growing Environmental, Social, and Governance (ESG) sentiment in the market. External events, such as the Russia-Ukraine war and the Covid-19 pandemic, have discernible impacts on financial prices. The study provides valuable implications for investors and hedgers, offering guidance for portfolio optimization and emphasizing the consideration of sustainable financial products.

Suggested Citation

  • Marco Tedeschi, 2023. "Idiosyncratic and systematic spillovers through the renewable energy financial systems," Working Papers 483, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    • Handle: RePEc:anc:wpaper:483
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    References listed on IDEAS

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    4. Robert G. Eccles & Mirtha D. Kastrapeli & Stephanie J. Potter, 2017. "How to Integrate ESG into Investment Decision†Making: Results of a Global Survey of Institutional Investors," Journal of Applied Corporate Finance, Morgan Stanley, vol. 29(4), pages 125-133, December.
    5. Pesaran, M Hashem & Timmermann, Allan, 1992. "A Simple Nonparametric Test of Predictive Performance," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(4), pages 561-565, October.
    6. Hanif, Waqas & Mensi, Walid & Gubareva, Mariya & Teplova, Tamara, 2023. "Impacts of COVID-19 on dynamic return and volatility spillovers between rare earth metals and renewable energy stock markets," Resources Policy, Elsevier, vol. 80(C).
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    More about this item

    Keywords

    Cointegration; Spillovers: Renewable Energies; Fossil Fuels; ESG.;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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