Energy transition metals and global sentiment: Evidence from extreme quantiles

This paper examines the quantile connectedness between energy transition metals, defined as those needed for the transition from dirty to clean energy, and global economic and financial sentiment benchmarks. Using data for five metals, - namely, aluminum, cobalt, copper, lithium, and nickel, - and two sentiment indices over 2019-2022, we empirically demonstrate that the US Economic Sentiment Index (ESI) and Societe Generale Global Sentiment Index (SGGSI) are found to be net receivers of shocks across all four extreme quantiles: 0.05, 0.10, 0.90, and 0.95. Thus, it is shown that energy transition metal markets impact global sentiment, especially during stressed periods. We also document that the total connectedness/risk spillovers between clean energy metals and sentiment indices exhibit substantial increase in the extreme quantiles. Moreover, we provide empirical evidence that there is asymmetry in spillovers over time and across quantiles.

Automated summary

This study empirically examines the connection between energy transition metals and global economic and financial sentiment. The findings suggest that the energy transition metal markets impact global sentiment, especially during stressed periods. Furthermore, the risk spillovers between clean energy metals and sentiment indices increase substantially in extreme quantiles, and there is asymmetry in spillovers over time and across quantiles.