Spillovers and hedging effectiveness of non-ferrous metals and sub-sectoral clean energy stocks in time and frequency domain

Non-ferrous metals are not only irreplaceable raw materials to ensure clean energy production and low-carbon transformation, but also effective risk-averting choices for clean energy stock investment. This paper explores the strength and network characteristics of spillovers among non-ferrous metals and sub-sectoral clean energy stocks from time and frequency perspectives. Then, the portfolio diversification and hedging with non-ferrous metals for sub-sectoral clean energy stocks are discussed. The sample period ranges from October 13th, 2010 to June 23th, 2021. Results show that: (1) the spillovers are mainly resulted in short-term factors; (2) the spillovers are volatile and increases when facing special crises; (3) non-ferrous metals are the smallest transmitter and receiver in both time and frequency domain; (4) non-ferrous metals work the best as the hedging asset for the developer stocks. In general, adjusting the portfolio strategy timely and diversifying investment portfolios in clean energy stocks with non-ferrous metals are effective to reduce investment risks.

Automated summary

This paper explores the spillover effects and network characteristics between non-ferrous metals and sub-sectoral clean energy stocks, as well as portfolio diversification and hedging strategies. The results show that non-ferrous metals have a minimal transmission and receiving role in both time and frequency domain, making them the best hedging asset for developer stocks.