Do geopolitical events transmit opportunity or threat to green markets? Decomposed measures of geopolitical risks

Kazi Sohag, Shawkat Hammoudeh, Ahmed H. Elsayed, Oleg Mariev, Yulia Safonova

Research output: Contribution to journalArticlepeer-review

83 Citations (Scopus)

Abstract

The growth of clean energies and technologies requires a sound financial market, while equity and bond markets are exposed to geopolitical risks. We investigate the response of green equity and green bonds to newly develop decomposed measures of geopolitical risks, including geopolitical acts, threats, and narrow and broad measures. To this end, we apply two robust methods; namely, the cross-quantilogram and quantile and quantile (QQ) approaches, to estimate the conditional and unconditional volatility spillovers considering short, medium, and long term. Surprisingly our empirical investigation demonstrates that all measures of geopolitical risk (except geopolitical acts) transmit positive shocks to the green investments (both equity and bonds) from bearish to bullish market states. At the bullish state, green markets respond negatively to the highest quantiles of all measures of geopolitical risks under a long memory. However, the geopolitical acts negatively shock the green bonds and green equity at some extreme quantiles. Our empirical findings are beneficial by transmitting opportunities and preventing risks for investment decision-making in the green markets, considering geopolitical risks.

Original languageEnglish
Article number106068
JournalEnergy Economics
Volume111
DOIs
Publication statusPublished - Jul 2022
Externally publishedYes

Keywords

  • Cross-quantilogram
  • Geopolitical risks
  • Green bonds
  • Green equity

ASJC Scopus subject areas

  • Economics and Econometrics
  • General Energy

Fingerprint

Dive into the research topics of 'Do geopolitical events transmit opportunity or threat to green markets? Decomposed measures of geopolitical risks'. Together they form a unique fingerprint.

Cite this