Dynamic spillover effects and connectedness among climate change, technological innovation, and uncertainty: Evidence from a quantile VAR network and wavelet coherence

This study investigated time-frequency transmission and connectedness among green indexes dealing with clean energy, environmental preservation, and technological innovation and information uncertainty related to economics news, the COVID-19 pandemic, and Twitter usage. First, by employing a quantile vector autoregression framework, we assessed how the static and dynamic connectedness between markets switched across a broad spectrum of market conditions, particularly bear, normal, and bull markets. Second, we examined the dynamics of the co-movement between green financial markets and the level of uncertainty in the time-frequency domain using novel vector wavelet coherence analysis. Our analysis yielded the following major findings: Statically, high spillover and volatility effects existed among the indexes; dynamically, evidence of very strong connectedness between climate change indexes was reported at extreme lower and extreme upper quantiles. The findings further exhibit the switching of climate change between net contributing/net receiving shock behavior during the pandemic. Technological innovation, the COVID-19 pandemic, and uncertainty have strong effects on climate change markets as revealed by multiple, quadruple, and vector wavelet analysis. Implications for both environmental investors and policymakers were revealed.

Automated summary

This study examined the transmission and connectedness between green indexes related to clean energy, environmental preservation, and technological innovation, as well as the impact of economic news, the COVID-19 pandemic, and Twitter usage. The findings revealed both static and dynamic connectedness among the indexes, with strong connectedness observed between climate change indexes at extreme quantiles. The study also showed that technological innovation, the COVID-19 pandemic, and uncertainty had significant effects on climate change markets. The implications of these findings were discussed for environmental investors and policymakers.