Externe Publikationen

Directional predictability and time-frequency spillovers among clean energy sectors and oil price uncertainty

Urom, Cristian / Hela Mzoughi / Gideon Ndubuisi / Khaled Guesmi
Externe Publikationen (2022)

in: Quarterly Review of Economics & Finance 85, 326-341

DOI: https://doi.org/https://doi.org/10.1016/j.qref.2022.04.005

This paper analyzes the dependence among clean energy sectors and oil price uncertainty using the NASDAQ OMX Green Economy Index for the Building, Economy, Edge, Financial, Technology and Transport sectors in the United States. First, we use the wavelet and Cross-Quantilogram (CQ) techniques to examine the directional predictability from oil price uncertainty to these clean energy sectors across different investment horizons and market conditions. Secondly, we use the Time-Varying Parameter (TVP-VAR) model with stochastic volatility to characterize the level of spillovers among the clean energy sectors and oil market uncertainty under different investment horizons. Results from the CQ demonstrate strong evidence of heterogeneous dependence and predictability from oil market uncertainty to clean energy sectors across different market conditions and investment horizons, pointing out the importance of active portfolio management. Also, we find that the level of shock spillovers is weak in the short-term but strengthens towards the intermediate- and long-term. In addition, there are other notable heterogeneities regarding the amount of information content for the different sectors’ and at different investment horizons from oil price uncertainty. Taken together, our results demonstrate that the direction and magnitude of the response of clean energy sectors to oil market uncertainty vary across sectors, and depend on market conditions and investment horizons. We document some crucial market conditions as well as horizon-specific implications for portfolio diversification for clean energy investors and portfolio managers.

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