Quantile connectedness between energy,metal, and carbon markets |
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| Institution: | 1. School of Business, Central South University, Changsha 410083, China;2. Institute of Metal Resources Strategy, Central South University, Changsha 410083, China;3. School of Economics and Management, China University of Mining and Technology, Xuzhou 221116, China;1. Indian Institute of Management (IIM) Bodh Gaya, Gaya, India;2. Department of Land Economy, University of Cambridge, United Kingdom;3. University of Ghana Business School, Accra, Ghana;4. Department of Economics & School of Business, University of Ibadan, Ibadan, Nigeria;5. School of Economics and Management, Nanchang University, Nanchang, China;1. Department of Economics and Finance, College of Economics and Political Science, Sultan Qaboos University, Muscat, Oman;2. South Ural State University, 76, Lenin Prospekt, Chelyabinsk, Russian Federation;3. Department of Accounting and Finance, Applied Science University, Al Eker, Bahrain;4. PNU Business School, Pusan National University, Busan, Republic of Korea |
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| Abstract: | This study employs a quantile connectedness approach to examine the dynamic linkages and tail risk connectedness between energy, metal, and carbon markets. Results show that the connectedness between energy, metal, and carbon markets is about 51% at the mean or median and 87% under extreme conditions. This means that the spillover effects of the two tails are much stronger than those under the conditional mean and normal markets, and the spillover effect between markets is heterogeneous under different market conditions. The connectedness between energy, metal, and carbon markets is time-varying, and the volatility is relatively small under extreme positive and negative conditions. Notably, the dynamic connectedness of energy, metal, and carbon markets is different in extreme upward and downward markets, which reflects the asymmetry and tail dependence of spillover effects between markets and indicates that spillover effects are different between the periods of upward and downward markets. In addition, the results of portfolio strategy show that holding short positions in the carbon market is an effective investment choice. |
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