Co-movement between dirty and clean energy: A time-frequency perspective

In the backdrop of the recent covid-19 pandemic there is a renewed interest to understand the interlinkages between dirty and clean energies. In this regard, the study examines the co-movement structure between clean energy stocks and dirty energies before and during the covid-19 outbreak. The study analyses the interlinkages between the underlying markets by utilizing a vast sample of dirty energies namely crude oil, heating oil, gas oil, gasoline and natural gas, whereas clean energy sector is proxied by S&P Global clean energy index and Wilder Hill clean energy index. We make use of rolling window wavelet approach and wavelet coherence analysis to identify interdependencies between the clean energy stocks and dirty energies. The results exhibit weak linkages between clean energy equities and dirty energies in the short-run, while;we also record few occasions of high co-movements among dirty and clean energy markets in the long-run. Noticeably, a distinct decoupling effect persisted between dirty and clean energy markets. In addition, the findings also illustrate that clean energy market is relatively isolated from dirty energies during the recent pandemic crisis, amplifying portfolio diversification benefits across clean and dirty energy markets. The findings of the study hold meaningful insights for investors, policy makers and other market participants in energy financial markets.

Comparing asymmetric price efficiency in regional ESG markets before and during COVID-19.

The ever-emerging environmental, social, and governance (ESG) concerns have received significant attention of policymakers, governments, regulation bodies, and investors. Considering the markets volatilities due to economic and financial uncertainties that can drive the informational price inefficiencies across the markets, this study compares the asymmetric price efficiency of regional ESG markets by using an asymmetric multifractal detrended fluctuation analysis before and during COVID-19 crisis. We then examine whether global factors influence the asymmetric efficiency of regional ESG markets. Our findings reveal that COVID-19 outbreak reduced the efficiency of regional ESG markets, except for Europe, which sustained its efficiency even during the pandemic. Moreover, global factors drive the efficiency of regional ESG markets significantly before and during COVID-19. A major implication of our findings stems from the fact that a contagion reduces the efficiency of the markets while stable economic conditions make those markets informationally efficient.

COVID-19 and Connectedness between Sustainable and Islamic Equity Markets

Because of the increasing importance of and demand for ethical investment, this paper investigates the dynamics of connectedness between sustainable and Islamic investment in nineteen countries that represent developed and emerging financial markets worldwide. To this end, we apply models proposed by Diebold and Yilmaz and Barunik and Krehlik to explore the overall and frequency-based connectedness between selected ethical investments. Our results reveal evidence of a moderate to strong intra country-level connectedness between sustainable and Islamic investment and limited cross-country connectedness between ethical investments. The time-varying connectedness analysis suggests enhanced connectedness during periods of market-wide turmoil, such as the European debt crisis, the Chinese financial crisis, and the COVID-19 pandemic. Moreover, the COVID-19 subsample analysis shows an enhanced and idiosyncratic country-level and cross-country connectedness structure between ethical investments, indicating the evolving nature of the relationship between sustainable and Islamic investment.

Comparing the asymmetric efficiency of dirty and clean energy markets pre and during COVID-19.

In the backdrop of the recent COVID-19 pandemic, the study examines the comparative asymmetric efficiency of dirty and clean energy markets pre and during the COVID-19 pandemic. For this purpose, we utilize an asymmetric multifractality detrended fluctuation analysis (A-MF-DFA). The study's findings uncover the presence of asymmetric multifractality in clean and dirty energy markets. In addition, multifractality in the energy markets is sensitive to trends, time horizon and major events. More importantly, the results suggest superior efficiency of clean-energy markets compared to conventional energies. We confirm the time-varying nature of market efficiency in the energy markets, and during the recent COVID-19 outbreak, market inefficiencies in the clean and dirty energy markets soared. In this way, the study holds meaningful insights for policymakers, energy policy practitioners, investors, and financial market participants to choose between clean (dirty) investments based on their asymmetric efficiency (inefficiency).

Diversifier or more? Hedge and safe haven properties of green bonds during COVID-19.

Against the backdrop of the COVID-19 pandemic, the study explores the hedging and safe-haven potential of green bonds for conventional equity, fixed income, commodity, and forex investments. We employ the cross-quantilogram approach to understand better the dynamic relationship between two assets under different market conditions. Our full sample results reveal that the green bond index could serve as a diversifier asset for medium- and long-term equity investors. Besides, it can serve as a hedging and safe-haven instrument for currency and commodity investments. Moreover, the sub-sample analysis of the pandemic period shows a heightened short- and medium-term lead-lag association between the green bond index and conventional investment returns. However, the green bond index emerges as a significant hedging and safe-haven asset for long-term investors of conventional financial assets. Our findings offer valuable insights for long-term investors when their portfolios are comprised of conventional assets such as equities, commodities, forex, and fixed income securities. Further, our findings reveal the potential role of green bond investments in global financial recovery efforts without compromising the low-carbon transition targets.

Impact of COVID-19 on the quantile connectedness between energy, metals and agriculture commodities.

With many studies highlighting the heterogeneous impact of the COVID-19 pandemic on different commodity markets, this study provides evidence of quantile connectedness between energy, metals, and agriculture commodity markets before and during the COVID-19 outbreak. Since mean-based measures of connectedness are not necessarily suitable to measure connectedness in the crisis period, especially in the tails of the return distribution, thus in this study, we use the newly developed approach of quantile-based connectedness. The full-sample analysis results show that return shocks only propagate within the energy commodity group. The findings manifest that transmission of return spillovers is stronger in the left and right tails of the conditional return distribution. In addition, the results unveil that degree of tail-dependence between energy, metals, and agriculture commodities are time-varying. Meanwhile, our sub-sample analysis clearly shows that the commodity market return connectedness demonstrates a significant shift over time due to COVID-19 shocks. There is evidence of strong transmission of return shocks between energy, metals, and agriculture commodities during the COVID-19 fiasco. Finally, the results also illustrate that softs and livestock commodities hold significant diversification benefits for energy market investors.

Time-frequency connectedness among clean-energy stocks and fossil fuel markets: Comparison between financial, oil and pandemic crisis

Motivated by lack of empirical research on volatility linkages among clean-energy stock markets and fossil fuel markets during the recent Covid-19 pandemic, the study examines the volatility connectedness network among clean-energy stocks and fossil fuels such as crude WTI, natural gas, gas oil, and fuel oil. In addition, we also compare the influence of financial crises such as the Global Financial Crisis (GFC), oil crisis, and Covid-19 pandemic crisis is driving the volatility connectedness network of energy markets. We apply Diebold and Yilmaz (2012) [1] time-domain and Barunik and Krehlik (Baruník and Křehlík, 2018) [2] frequency-domain approach. The empirical results uncover weak volatility connections among clean-energy stocks and fossil fuel markets. Also, the empirical results unveil weak volatility linkages among clean energy stocks and conventional energy markets. Meanwhile, we find strong volatility interconnectedness between petroleum markets. Further, the results show that most of the volatility spillovers among energy markets persist in the short-run, whereas the findings display weak volatility transmission among the sample markets in the long run. Furthermore, the findings also unveil that contagion effects between the energy markets increase in the crisis periods, intensifying the volatility interlinkages among the sample energy markets. The findings have important significance for energy policymakers and investors.

Comparative efficiency of green and conventional bonds pre- and during COVID-19: An asymmetric multifractal detrended fluctuation analysis

Motivated by the lack of research on price efficiency dynamics of green bonds and the impact of the COVID-19 on the pricing of fixed-income securities, this study investigates the comparative efficiency of green and conventional bond markets pre- and during the COVID-19 pandemic applying asymmetric multifractal analysis. Specifically, the multifractal scaling behaviour is examined separately during upward and downward trends in bond markets using the asymmetric multifractal detrended fluctuation analysis (A-MF-DFA) approach. The empirical findings confirm the presence of asymmetric multifractality in the green and traditional bond markets. Not surprisingly, inefficiency in both bond markets significantly escalated during the COVID-19 outbreak. Furthermore, our results indicate a higher level of efficiency of the conventional bond market over the full sample period. However, the green bond market is more efficient during a black swan event, such as the COVID-19 global pandemic, showing the potential of green bonds to become an effective diversifier for investors in traditional assets in times of extreme market turmoil. The results of the study can have important implications for investors and policymakers.