Time and Frequency Connectedness Among Oil Shocks, Electricity and Clean Energy Markets

32 Pages Posted: 3 Sep 2020

See all articles by Muhammad Naeem

Muhammad Naeem

Massey University

Zhe Peng

Wilfrid Laurier University - School of Business & Economics

Mouhammed Tahir Suleman

Department of Accounting and Finance, University of Otago

Rabindra Nepal

School of Accounting, Economics, and Finance, University of Wollongong

Syed Jawad Hussain Shahzad

Montpellier Business School

Date Written: September 2, 2020

Abstract

This paper examines the time and frequency dynamics of connectedness between oil price shocks (demand and supply), and energy, electricity, carbon and clean energy markets using the methodology developed by Diebold and Yilmaz (2012) and Barunik and Krehlik (2018). The empirical findings show that there is time-varying connectedness among all variables in the sample. We find increased connectedness during the global financial crisis as well as in the shale oil revolution period. The total connectedness is more significant and higher in the short-term compared to the long-term. Net pairwise directional connectedness become more important during the shale oil revolution among oil supply, oil demand and clean energy index. The findings of the static full sample and sub-samples (GFC and SOR) provide significant evidence of the electricity futures as diversifier and safe-haven asset for oil shocks. These results can have important implications for investors and policymakers with different time horizons.

Keywords: Oil shocks, Time-frequency connectedness, Electricity market, Carbon price, Clean energy

JEL Classification: G14, G15, Q41, Q42

Suggested Citation

Naeem, Muhammad and Peng, Zhe and Suleman, Mouhammed Tahir and Nepal, Rabindra and Hussain Shahzad, Syed Jawad, Time and Frequency Connectedness Among Oil Shocks, Electricity and Clean Energy Markets (September 2, 2020). CAMA Working Paper No. 81/2020, Available at SSRN: https://ssrn.com/abstract=3684989 or http://dx.doi.org/10.2139/ssrn.3684989

Muhammad Naeem

Massey University ( email )

Auckland
New Zealand

Zhe Peng

Wilfrid Laurier University - School of Business & Economics ( email )

Waterloo, Ontario N2L 3C5
Canada

Mouhammed Tahir Suleman

Department of Accounting and Finance, University of Otago ( email )

P.O. Box 56
Dunedin, Otago 9010
New Zealand

Rabindra Nepal (Contact Author)

School of Accounting, Economics, and Finance, University of Wollongong ( email )

Northfields Avenue
Wollongong, New South Wales 2522
Australia

Syed Jawad Hussain Shahzad

Montpellier Business School ( email )

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