Systemic risk contagion of green and Islamic markets with conventional markets.

Financial markets are exposed to extreme uncertain circumstances escalating their tail risk. Sustainable, religious, and conventional markets represent three different markets with various characteristics. Motivated with this, the current study measures the tail connectedness between sustainable, religious, and conventional investments by employing a neural network quantile regression approach from December 1, 2008 to May 10, 2021. The neural network recognized religious and conventional investments with maximum exposure to tail risk following the crisis periods reflecting strong diversification benefits of sustainable assets. The Systematic Network Risk Index spots Global Financial Crisis, European Debt Crisis, and COVID-19 pandemic as intensive events yielding high tail risk. The Systematic Fragility Index ranks the stock market in the pre-COVID period and Islamic stocks during the COVID sample as the most susceptible markets. Conversely, the Systematic Hazard Index nominates Islamic stocks as the chief risk contributor in the system. Given these, we portray various implications for policymakers, regulatory bodies, investors, financial market participants, and portfolio managers to diversify their risk using sustainable/green investments.

COVID-induced sentiment and the intraday volatility spillovers between energy and other ETFs.

Did Covid19 induce market turmoil impact the intraday volatility spillovers between energy and other ETFs?. To examine this, we first estimate the realized volatility of ETFs using the 5-min high-frequency data. Next, we employ time-varying parameter vector autoregressions (TVP-VAR). Finally, we utilize the wavelet coherence measure to test the time-frequency impact of COVID-induced sentiment on the spillovers by employing investors' psychological and behavioural factors. We find that oil and stock markets are net transmitters while currency, bonds, and silver markets are net receivers. The wavelet analysis embarked significant impact of media coverage and fake news index towards shaping investors' pessimism for their investments. We proposed useful implications for policymakers, governments, investors, and portfolio managers.

The impact of COVID-19 on the valuations of non-financial European firms.

This paper assesses the impact of the COVID-19 pandemic on non-financial firms' valuations in the European Union (EU) using a stress testing approach. Notably, the paper investigates the extent to which the COVID-19 may deteriorate non-financial firms' value in the ten EU countries to provide a robust anchor to policymakers in formulating strategic government interventions. We employ a sample of 5342 listed non-financial firms across the selected member states that have consistent analyst coverage from 2010 to 2019. First, we estimate the input sensitivities of free cash flow and residual income models using a random effect panel employed to in-sample data. Second, based on these sensitivities, we compute the model-driven ex-post valuations and compare their robustness with actual price and analyst forecasts for the same period. Finally, we introduce multiple stress scenarios that may emanate from COVID-19, i.e., a decline in expected sales and an increase/decrease in equity cost. Our findings show a significant loss in valuations across all sectors due to a possible reduction in sales and an increase in equity cost. In extreme cases, average firms in some industries may lose up to 60% of their intrinsic value in one year. The results remained consistent regardless of the cash flow or residual income-driven valuation.

Did COVID-19 change spillover patterns between Fintech and other asset classes?

This study examines the spillover effect between financial technology (Fintech) stocks and other financial assets (gold, Bitcoin, a global equity index, crude oil, and the US Dollar) during the COVID-19 crisis. Employing daily data from June 2019 to August 2020, our empirical analysis shows that the outbreak of COVID-19 exacerbated volatility transmission across asset classes, while subsequent decreases in new confirmed cases globally reduced the intensity of these spillovers. The evidence for the USD and gold supports their safe haven properties during catastrophic events, while innovative technology products as represented by a financial technology index (KFTX) and Bitcoin were highly susceptible to external shocks. These results show that when push comes to shove, the buck stops with the USD and gold and that the exorbitant privilege enjoyed by the USD prevailed during the COVID-19 pandemic.

Does green financing help to improve environmental & social responsibility? Designing SDG framework through advanced quantile modelling.

Striving to achieve the Sustainable Development Goals (SDGs), countries are increasingly embracing a sustainable financing mechanism via green bond financing. Green bonds have attracted the attention of the industrial sector and policymakers, however, the impact of green bond financing on environmental and social sustainability has not been confirmed. There is no empirical evidence on how this financial product can contribute to achieving the goals set out in Agenda 2030. In this study, we empirically analyze the impact of green bond financing on environmental and social sustainability by considering the S&P 500 Global Green Bond Index and S&P 500 Environmental and Social Responsibility Index, from October 1, 2010 to 31st July 2020 using a combination of Quantile-on-Quantile Regression and Wavelet Multiscale Decomposition approaches. Our results reveal that green financing mechanisms might have gradual negative transformational impacts on environmental and social responsibility. Furthermore, we attempt to design a policy framework to address the relevant SDG objectives.

"Shiny" crypto assets: A systemic look at gold-backed cryptocurrencies during the COVID-19 pandemic.

In this paper, we empirically analyse the performance of five gold-backed stablecoins during the COVID-19 pandemic and compare them to gold, Bitcoin and Tether. In the digital assets' ecosystem, gold-backed cryptocurrencies have the potential to address regulatory and policy concerns by decreasing volatility of cryptocurrency prices and facilitating broader cryptocurrency adoption. We find that during the COVID-19 pandemic, gold-backed cryptocurrencies were susceptible to volatility transmitted from gold markets. Our results indicate that for the selected gold-backed cryptocurrencies, their volatility, and as a consequence, risks associated with volatility, remained comparable to the Bitcoin. In addition, gold-backed cryptocurrencies did not show safe-haven potential comparable to their underlying precious metal, gold.

COVID-19 pandemic, oil prices, stock market, geopolitical risk and policy uncertainty nexus in the US economy: Fresh evidence from the wavelet-based approach.

In this paper, we analyze the connectedness between the recent spread of COVID-19, oil price volatility shock, the stock market, geopolitical risk and economic policy uncertainty in the US within a time-frequency framework. The coherence wavelet method and the wavelet-based Granger causality tests applied to US recent daily data unveil the unprecedented impact of COVID-19 and oil price shocks on the geopolitical risk levels, economic policy uncertainty and stock market volatility over the low frequency bands. The effect of the COVID-19 on the geopolitical risk substantially higher than on the US economic uncertainty. The COVID-19 risk is perceived differently over the short and the long-run and may be firstly viewed as an economic crisis. Our study offers several urgent prominent implications and endorsements for policymakers and asset managers.