article · Economic Change and Restructuring
An assessment of daily dynamic volatility connectedness among fossil energy, clean energy, and major financial assets examined relationships between September 2014 and October 2022. Using a novel statistical modelling method, the analysis tracked interactions between crude oil, clean energy, bonds, Bitcoin, the US Dollar index, gold, and the S&P 500 index. Findings indicate that overall volatility spillover across these markets is time-varying and averages 32.8 percent. Connectedness peaked during major international disruptions, notably the onset of the coronavirus pandemic, alongside heightened movements during the Russia-Ukraine conflict, Brexit milestones, and the China-US trade dispute. Crude oil, bonds, and Bitcoin functioned primarily as volatility transmitters, while gold, the Dollar index, and the S&P 500 predominantly absorbed shocks. Clean energy remained neutral to market shocks until early 2020, after which it shifted into a net transmitter of market volatility.
Financial markets and energy commodities are increasingly linked during global crises. Understanding how price shocks transfer between conventional fuels, renewable energy, and core financial holdings helps institutional managers and policymakers anticipate cross-market contagion. This clarifies how clean energy investments interact with wider financial assets under macroeconomic stress.
The empirical findings can inform risk management, portfolio diversification, and hedging strategies utilised by financial institutions, fund managers, and energy sector investors. Because the findings are drawn from econometric modelling rather than applied software or decision-support tooling, this research sits at an early, analytical stage of practical implementation.
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Abstract The objective of this paper is to assess the dynamic volatility connectedness between fossil energy, clean energy, and major assets i.e., Bonds, Bitcoin, Dollar index, Gold, and Standard and Poor's 500 from September 17, 2014 to October 11, 2022. The main motivation of the study relates to examining the dynamic volatility connectedness mentioned during periods of important events such as the recent coronavirus pandemic and the Russia–Ukraine conflict which has shown the vulnerability of economic and financial assets, energy commodities, and clean energy. The novel Dynamic Conditional Correlation-Generalized Autoregressive Conditional Heteroskedasticity (DCC-GARCH) approach is employed for the investigation of the sample period mentioned. Empirical analysis reveals that both the total and net volatility connectedness between assets is time-varying. The highest connectedness among the assets is observed with the onset of the coronavirus (COVID-19) pandemic, and it increases with some important international events, such as the Russia–Ukraine conflict, the referendum of Brexit, China–US trade war, and Brexit day. On average, the result shows that 32.8% of the volatility in one asset spills over to all other assets. The DCC-GARCH results also indicate that crude oil, bonds, and Bitcoin act as almost pure volatility transmitters, whereas the Dollar index, gold, and S&P500 act as volatility receivers. On the other hand, clean energy is found neutral to external shocks until the first quarter of 2020 and after that time, it starts to behave as a volatility transmitter. Based on the obtained results, we offer some specific policy implications that are beneficial to the US economy and other countries. Graphical Abstract Dynamic volatility connectedness between fossil energy, clean energy, and major assets (Bonds, Bitcoin, Dollar index, Gold, and Standard and Poor's 500)
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DOI: 10.1007/s10644-024-09696-9
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