Oil shocks and volatility of green investments: GARCH-MIDAS analyses

Yaya, OlaOluwa S and Ogbonna, Ahamuefula and Vo, Xuan Vinh (2022): Oil shocks and volatility of green investments: GARCH-MIDAS analyses. Published in: Resources Policy

Abstract

This study examines how market volatility of five green investments (Standard & Poor’s - S&P [Green bond select index and Green bond index] and Morgan Stanley Capital International - MSCI [Global alternative energy index, Global pollution prevention index, and Global green building index]) respond to oil shocks; using the Generalized Autoregressive Conditional Heteroscedasticity with Mixed Data Sampling (GARCH-MIDAS) modelling framework. We employ Baumeister and Hamilton’s decomposed oil shocks: economic activity shocks, oil consumption demand shocks, oil inventory demand shocks, and oil supply shocks; each in their original levels, as well as their negatively and positively disaggregated levels. Our findings show homogeneous and heterogeneous responses of green investments volatility to variants of oil shocks. Asymmetry effect is also evidenced, given the differences between the estimated effect of positive and negative oil shocks on the volatility of green investments.

• Item Type: MPRA Paper
• Language: English
• Keywords: GARCH-MIDAS; green bond; oil shocks; asymmetry
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General; C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C12 - Hypothesis Testing: General; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets

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