Browsing by Subject "Impulse-Response analysis"

Now showing 1 - 4 of 4

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Financial fusion: bridging islamic and green investments in the European stock market
(Elsevier Ltd., 2024-07) Husain, Afzol; Karim, Sitara; Şensoy, Ahmet
Given the historic decoupling nature of Islamic and green financial instruments with conventional financial markets this study investigated the interconnectedness of the European financial market with green and Islamic financial instruments amidst the unprecedented global dynamics and mounting uncertainties. Considering data from January 02, 2015, to October 03, 2023 and using TVP-VAR and Wavelet Coherence, our empirical findings challenge conventional assumptions about the behaviour of Islamic and green financial instruments in times of economic distress. While traditional financial instruments may falter, both Islamic and green financial instruments emerge as resilient options during market crises as indicated using quantile TVP-VAR as robustness measure. Both Islamic and Green bonds display remarkable potential for stability and resilience for European investors. For investors navigating the complexities of financial markets, especially during economic distress, our findings offer valuable guidance. Incorporating Islamic and green financial instruments, alongside diversified bond portfolios, emerges as a robust strategy. We strongly advocate the inclusion of both sukuk and green bonds in investment portfolios. Our result research also holds significant implications for policymakers.
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How does the time-varying dynamics of spillover between clean and brown energy ETFs change with the intervention of climate risk and climate policy uncertainty?
(Elsevier Ltd., 2024-06) Banerjee, Ameet Kumar; Özer, Zeynep Sueda; Rahman, Ramizur; Şensoy, Ahmet
This paper studies how climate change risks and uncertainty in climate policies impact asset pricing. We analyze this issue through the interaction mechanism between clean and brown energy ETFs. We choose energy ETFs for their broader role in the transition phase as investment flows into clean energy ETFs with rising climate change risks. The paper analyzes the changing dynamics of interconnectedness between clean and carbon-energy assets as they differ in transmitting and receiving shocks between normal versus crisis periods in the backdrop of climate risk. Using daily data of clean and brown energy instruments with the TVP-VAR framework, we show that the asymmetric connectedness between the two instruments increases during crises. Specific clean and brown instruments are either net givers or receivers, and the climate risk and policy uncertainty variables are net receivers throughout the study periods. The results bring newer insights into interconnectivity, which have significant implications for market participants, especially for policymakers strategizing risk mitigation policies and the fund management industry for broader diversification and eco-savvy investors investing in eco-efficient portfolios offering better risk-return tradeoffs.
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Volatility connectedness between geopolitical risk and financial markets: insights from pandemic and military crisis periods
(Elsevier Ltd., 2024-11) Banerjee, Ameet Kumar; Şensoy, Ahmet; Goodell, John W.
Geopolitical risk notably affects cross-market linkages and risk spillovers. However, the void remains in the extant literature, providing little empirical evidence on the risk spillover influences of geopolitical crises on different segments of financial markets. Employing a time-varying VAR framework to model a risk spillover network, this paper examines the risk spillover across geopolitical risk, stocks, bonds, forex, gold, and energy markets from crisis and long-term perspectives. Results show that the bond market plays a significant role in the spillover network. Results also identify more risk spillover during military conflicts than during the COVID-19 pandemic. Geopolitical risk intensifies under geopolitical threats and conflicts, amplifying cross-market spillovers, with geopolitical risk acting as a risk transmitter. Gold is a risk receiver in both the long-term and crisis periods, with risk spillovers from geopolitical risk to market segments being asymmetric. These findings have significant implications for policymakers and market participants.
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Volatility spillovers and hedging strategies between impact investing and agricultural commodities
(Elsevier Ltd., 2024-07) Banerjee, Ameet Kumar; Akhtaruzzaman, Md; Şensoy, Ahmet; Goodell, John W.
We examine spillover and hedging among impact investing and agricultural commodities. Results demonstrate that impact investing is a prominent spillover transmitter during both calm conditions and crises, while agricultural commodities are typically receivers. Analysis indicates that hedging effectiveness is enhanced by portfolios containing impact investing and agricultural products, with this more so during crises. Additionally, analysis reveals that irrespective of position on the risk aversion spectrum, investors gain utility substantially by including impact investing and agricultural assets, even considering transaction costs. These findings add to the extant literature and offer practical implications for investors, fund managers, and policymakers regarding risk management perspectives and portfolio diversification.