IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-04720742.html
   My bibliography  Save this paper

The importance of climate policy uncertainty in forecasting the green, clean and sustainable financial markets volatility

Author

Listed:
  • S. A. Raza
  • K. A. Khan
  • R. Benkraiem

    (Audencia Business School)

  • K. Guesmi

Abstract

This research represents the first empirical evidence highlighting the significant role of climate policy uncertainty in predicting the green, clean, and sustainable financial markets volatility. The analysis incorporates Gavriilidis's (2021) recently introduced news-based climate policy uncertainty index. To conduct this investigation, an advanced econometric approach, namely GARCH-MIDAS, has been employed, considering two sample periods: (i) full period (ii) COVID-19 period. Furthermore, the study reveals that climate policy uncertainty amplifies volatility of the S&P Green Bond Index, S&P Global Clean Energy Index, and Dow Jones Sustainability Index, rendering these indices highly sensitive to such uncertainty. Additionally, the out-of-sample analysis demonstrates climate policy uncertainty as a strong predictor, with the GARCH-MIDAS model displaying superior predictive accuracy. The findings of this research bear significant implications for strategies related to risk mitigation and diversification of portfolio particularly for investors, policymakers, and portfolio managers.

Suggested Citation

  • S. A. Raza & K. A. Khan & R. Benkraiem & K. Guesmi, 2024. "The importance of climate policy uncertainty in forecasting the green, clean and sustainable financial markets volatility," Post-Print hal-04720742, HAL.
    • Handle: RePEc:hal:journl:hal-04720742
    DOI: 10.1016/j.irfa.2023.102984
    Note: View the original document on HAL open archive server: https://hal.science/hal-04720742v1
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-04720742. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.