Time and frequency connectedness among oil shocks, electricity and clean energy markets

Muhammad Abubakr Naeem; Zhe Peng; Mouhammed Tahir Suleman; Rabindra Nepal; Syed Jawad Hussain Shahzad

doi:10.1016/j.eneco.2020.104914

Time and frequency connectedness among oil shocks, electricity and clean energy markets

Muhammad Abubakr Naeem, Zhe Peng, Mouhammed Tahir Suleman, Rabindra Nepal, Syed Jawad Hussain Shahzad

Research output: Contribution to journal › Article › peer-review

199 Citations (Scopus)

Abstract

This paper examines the time and frequency connectedness among electricity, carbon and clean energy markets, and oil price demand and supply shocks. In doing so, we use the spillover method proposed by Diebold and Yilmaz (2012) and its extension in the frequency domain by Baruník and Křehlík (2018). We find increased connectedness during the global financial crisis as well as in the shale oil revolution period. The total connectedness is also higher in the short-run compared to the long-run. Due to their low connectedness, electricity futures can act as a risk diversifier and safe-haven asset against oil shocks. Net pairwise directional connectedness among oil shocks and the clean energy index is higher during the shale oil revolution. These results have important implications for investors with different investment time horizons.

Original language	English
Article number	104914
Journal	Energy Economics
Volume	91
DOIs	https://doi.org/10.1016/j.eneco.2020.104914
Publication status	Published - Sept 2020
Externally published	Yes

Keywords

Carbon price
Clean energy
Electricity market
Oil shocks
Time and frequency connectedness

ASJC Scopus subject areas

Economics and Econometrics
General Energy

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10.1016/j.eneco.2020.104914

Cite this

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title = "Time and frequency connectedness among oil shocks, electricity and clean energy markets",

abstract = "This paper examines the time and frequency connectedness among electricity, carbon and clean energy markets, and oil price demand and supply shocks. In doing so, we use the spillover method proposed by Diebold and Yilmaz (2012) and its extension in the frequency domain by Barun{\'i}k and K{\v r}ehl{\'i}k (2018). We find increased connectedness during the global financial crisis as well as in the shale oil revolution period. The total connectedness is also higher in the short-run compared to the long-run. Due to their low connectedness, electricity futures can act as a risk diversifier and safe-haven asset against oil shocks. Net pairwise directional connectedness among oil shocks and the clean energy index is higher during the shale oil revolution. These results have important implications for investors with different investment time horizons.",

keywords = "Carbon price, Clean energy, Electricity market, Oil shocks, Time and frequency connectedness",

author = "Naeem, {Muhammad Abubakr} and Zhe Peng and Suleman, {Mouhammed Tahir} and Rabindra Nepal and Shahzad, {Syed Jawad Hussain}",

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T1 - Time and frequency connectedness among oil shocks, electricity and clean energy markets

AU - Naeem, Muhammad Abubakr

AU - Peng, Zhe

AU - Suleman, Mouhammed Tahir

AU - Nepal, Rabindra

AU - Shahzad, Syed Jawad Hussain

PY - 2020/9

Y1 - 2020/9

N2 - This paper examines the time and frequency connectedness among electricity, carbon and clean energy markets, and oil price demand and supply shocks. In doing so, we use the spillover method proposed by Diebold and Yilmaz (2012) and its extension in the frequency domain by Baruník and Křehlík (2018). We find increased connectedness during the global financial crisis as well as in the shale oil revolution period. The total connectedness is also higher in the short-run compared to the long-run. Due to their low connectedness, electricity futures can act as a risk diversifier and safe-haven asset against oil shocks. Net pairwise directional connectedness among oil shocks and the clean energy index is higher during the shale oil revolution. These results have important implications for investors with different investment time horizons.

AB - This paper examines the time and frequency connectedness among electricity, carbon and clean energy markets, and oil price demand and supply shocks. In doing so, we use the spillover method proposed by Diebold and Yilmaz (2012) and its extension in the frequency domain by Baruník and Křehlík (2018). We find increased connectedness during the global financial crisis as well as in the shale oil revolution period. The total connectedness is also higher in the short-run compared to the long-run. Due to their low connectedness, electricity futures can act as a risk diversifier and safe-haven asset against oil shocks. Net pairwise directional connectedness among oil shocks and the clean energy index is higher during the shale oil revolution. These results have important implications for investors with different investment time horizons.

KW - Carbon price

KW - Clean energy

KW - Electricity market

KW - Oil shocks

KW - Time and frequency connectedness

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Time and frequency connectedness among oil shocks, electricity and clean energy markets

Abstract

Keywords

ASJC Scopus subject areas

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