FFA Working Papers 4:001 (2022)1792

Return and volatility spillovers between Chinese and U.S. Clean Energy Related Stocks: Evidence from VAR-MGARCH estimations

Karel Janda, Ladislav Kristoufek, Binyi Zhang
Prague University of Economics and Business

Objective of this paper is to empirically investigate the dynamic connectedness between oil prices and stock returns of clean energy related and technology companies in China and U.S. financial markets. Three different multivariate Generalised Autoregression Conditional Heteroscedasticity (VAR-MGARCH) model specifications are used to investigate the return and volatility spillovers among series.  By comparing these three models, we find that the VAR(1)-DCC(1,1) model with the skewed Student t distribution fits the data the best. The results of DCC estimation reveal that, on average, a $1 long position in Chinese clean energy companies in the Chinese financial market can be hedged for 18 cents with a short position in clean energy index in the U.S market. Our empirical findings provide investors and policymakers with the systematic understanding of spillover effects between China and U.S. clean energy stock markets.

Keywords: Clean energy; Oil; Technology; Stock prices; VAR-MGARCH
JEL classification: G11, Q20

Received: November 16, 2021; Revised: January 17, 2022; Accepted: January 20, 2022; Published online: February 22, 2022  Show citation

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Janda, K., Kristoufek, L., & Zhang, B. (2022). Return and volatility spillovers between Chinese and U.S. Clean Energy Related Stocks: Evidence from VAR-MGARCH estimations. FFA Working Papers, 4, Article 2022.001. https://doi.org/10.XXXX/xxx.2022.001
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