Journal
RESOURCES POLICY
Volume 78, Issue -, Pages -Publisher
ELSEVIER SCI LTD
DOI: 10.1016/j.resourpol.2022.102789
Keywords
GARCH-MIDAS; Green bond; Oil shocks; Asymmetry
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This study examines the market volatility of five green investments in response to different types of oil shocks using the GARCH-MIDAS modeling framework. The findings suggest that the volatility of green investments shows both homogeneous and heterogeneous responses to various oil shocks, and an asymmetry effect is observed between the impact of positive and negative oil shocks on the volatility of green investments.
This study examines how market volatility of five green investments (Standard & Poor's - S&P [Green bond select index and Green bond index] and Morgan Stanley Capital International - MSCI [Global alternative energy index, Global pollution prevention index, and Global green building index]) respond to oil shocks; using the Generalized Autoregressive Conditional Heteroscedasticity with Mixed Data Sampling (GARCH-MIDAS) modelling framework. We employ Baumeister and Hamilton's decomposed oil shocks: economic activity shocks, oil consumption demand shocks, oil inventory demand shocks, and oil supply shocks; each in their original levels, as well as their negatively and positively disaggregated levels. Our findings show homogeneous and heterogeneous responses of green investments volatility to variants of oil shocks. Asymmetry effect is also evidenced, given the differences between the estimated effect of positive and negative oil shocks on the volatility of green investments.
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