Spillover connectedness nexus geopolitical oil price risk, clean energy stocks, global stock, and commodity markets

This study aims to investigate the volatility connectedness among geopolitical oil price risk, clean energy stocks, global equity, and commodity markets by utilizing novel empirical methods, namely Diebold and Yilmaz (2012) and Barunik and K.rehlik (2018), to examine the volatility connectedness among the sample markets based on time and frequency domains. The study employed monthly data spanning from September 2004 to September 2020. The results are as follows. First, geopolitical oil price risk and global equity markets act as net volatility transmitters, while the gold market serves as the sole net volatility receiver within the system. Second, geopolitical oil price risk transmits the highest volatility spillovers to the gold market. Third, we confirm the timevarying nature of volatility connectedness among geopolitical oil price risk, clean-energy, global equity, and commodity markets. We also observe that the volatility interlinkage among these markets intensifies during worldwide crisis periods, such as the Arab Spring, oil supply glut, and the COVID-19 pandemic crisis. Lastly, long-term connectedness plays the most dominant role in the system, indicating that volatility spillovers among markets are persistent and long-lasting. This suggests lower portfolio diversification opportunities for investors in the long run. Robustness checks for our empirical findings are also provided, and policy implications are discussed.

Automated summary

This study investigates the volatility connectedness among geopolitical oil price risk, clean energy stocks, global equity, and commodity markets using novel empirical methods. The results show that geopolitical oil price risk and global equity markets act as net volatility transmitters, while the gold market serves as the sole net volatility receiver within the system. The study also finds that volatility interlinkage among these markets intensifies during worldwide crisis periods.