Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/326836 
Year of Publication: 
2022
Series/Report no.: 
UNU-MERIT Working Papers No. 2022-027
Publisher: 
United Nations University (UNU), Maastricht Economic and Social Research Institute on Innovation and Technology (UNU-MERIT), Maastricht
Abstract: 
This paper examines how clean investments across different sectors respond to economic policy uncertainty (EPU) using the NASDAQ OMX Green Economy sectoral Indexes. We rely on Wavelets and the Cross-quantilogram techniques to examine the dependence and directional predictability from EPU to each sector's clean energy stock prices. Our results highlight evidence in support of strong heterogeneous dependence and directional predictability of sectoral clean energy returns from EPU across different market conditions and investment horizons. Second, we employ the Time-Varying Parameter-VAR (TVP-VAR) model with stochastic volatility to characterize the level of integration between clean energy sectors and EPU under different investment horizons. We find that the level of connectedness is weak in the short-term but becomes stronger in the medium- and long-term. Nonetheless, we distill some important heterogeneities in the predictive power of EPU for the different sectors across different investment horizons. Taken together, our results demonstrate that the direction and magnitude of the response of clean energy stock prices to EPU vary across sectors and depend on market conditions and horizons. This offers diversification benefits to investors and portfolio managers that may be interested in clean energy stocks across sectors, market conditions, and horizons.
Subjects: 
Economic-policy uncertainty
Clean-energy equities
Sectoral analysis
Timefrequency domains
Spillover
Directional predictability
JEL: 
G10
Q42
R11
Creative Commons License: 
cc-by-nc-sa Logo
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.