Do Geopolitical Events Transmit Opportunity or Threat to Green Markets? Decomposed Measures of Geopolitical Risks

Sohag, Kazi; Hammoudeh, Shawkat; Elsayed, Ahmed; Mariev, Oleg; Safonova, Yulia

doi:10.1016/j.eneco.2022.106068

Do Geopolitical Events Transmit Opportunity or Threat to Green Markets? Decomposed Measures of Geopolitical Risks

Sohag, Kazi; Hammoudeh, Shawkat; Elsayed, Ahmed; Mariev, Oleg; Safonova, Yulia

Authors

Kazi Sohag

Shawkat Hammoudeh

Dr Ahmed Elsayed ahmed.elsayed@durham.ac.uk
Associate Professor

Oleg Mariev

Yulia Safonova

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.

Citation

Sohag, K., Hammoudeh, S., Elsayed, A., Mariev, O., & Safonova, Y. (2022). Do Geopolitical Events Transmit Opportunity or Threat to Green Markets? Decomposed Measures of Geopolitical Risks. Energy Economics, 111, Article 106068. https://doi.org/10.1016/j.eneco.2022.106068

Journal Article Type	Article
Acceptance Date	Apr 24, 2022
Online Publication Date	May 23, 2022
Publication Date	2022-07
Deposit Date	May 17, 2022
Publicly Available Date	May 17, 2022
Journal	Energy Economics
Print ISSN	0140-9883
Publisher	Elsevier
Peer Reviewed	Peer Reviewed
Volume	111
Article Number	106068
DOI	https://doi.org/10.1016/j.eneco.2022.106068
Public URL	https://durham-repository.worktribe.com/output/1208401

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http://creativecommons.org/licenses/by-nc-nd/4.0/

Copyright Statement
© 2022 The Author(s). Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/bync-nd/4.0/).