Dynamic lead–lag relationship between Chinese carbon emission trading and stock markets under exogenous shocks

Chen, Zhang-HangJian; Ren, Fei; Yang, Ming-Yuan; Lu, Fengzhi; Li, Sai‐Ping

doi:10.1016/j.iref.2023.01.028

Cited by 21 publications

(13 citation statements)

References 36 publications

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“…It was also revealed that the stock market generally leads the Chinese carbon emissions trading market, with the relationship reversing when carbon market returns are significantly negative. Moreover, exogenous shocks, including government policy and the COVID-19 outbreak, have varying effects on the lead-lag relationship between the carbon market and different stock market sectors [3].…”

Section: Literature Reviewmentioning

confidence: 99%

Examining the Spillover Effects of Renewable Energy Policies on China’s Traditional Energy Industries and Stock Markets

Zhao,

Yu,

Meng

et al. 2024

Energies

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With the development and refinement of the carbon emissions trading market, the relationship between the carbon market and the stock market has grown increasingly intertwined. This has led to a surge in research investigating the interactions between the carbon market and related sectors. This study examines the intensity and direction of spillover effects among ten industries associated with carbon emissions, spanning traditional and emerging energy sectors. Through static analysis, we find that spillover effects between industries in the carbon and stock markets are bidirectional and asymmetric. Dynamic analysis reveals that the carbon market, acting as the primary recipient of spillover effects, is notably influenced by traditional energy industries such as coal and oil, followed by photovoltaics, new energy vehicles, and others. The magnitude of these spillover effects is subject to fluctuations influenced by energy crises and events like the COVID-19 pandemic, while policy interventions can alter the overall trends in net spillover effects across various industries.

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Section: Literature Reviewmentioning

confidence: 99%

Examining the Spillover Effects of Renewable Energy Policies on China’s Traditional Energy Industries and Stock Markets

Zhao,

Yu,

Meng

et al. 2024

Energies

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“…There is a corresponding time lag in the performance of the transmission channels or mechanisms for ERT’s impact on FDI, as the basic model demonstrates. In fact, policies or countermeasures have some lag or lag effect at any condition (Z. H. J. Chen et al, 2023; Shinagawa & Tsuzuki, 2019; Y.…”

Section: Research Hypothesesmentioning

confidence: 99%

“…In fact, policies or countermeasures have some lag or lag effect at any condition (Z. H. J. Chen et al, 2023;Shinagawa & Tsuzuki, 2019;Y. Yang & Zhang, 2021).…”

Section: Research Hypothesesmentioning

confidence: 99%

Empirical Analysis of Export Tax Rebate on Inwards Foreign Direct Investment in China

Li,

et al. 2023

Sage Open

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Export tax rebate (ETR) and inwards foreign direct investment (IFDI) are important driving forces for the steady development of China’s export-oriented economy. Based on data from 2004 to 2019, this study puts forward relevant assumptions on constructing a model for empirically analyzing the impact of the ETR on China’s IFDI from the perspective of the national and the sub-national. The result demonstrates that there exists a complementary relationship between the ETR and IFDI; the weak lag effect of ETR on IFDI in the eastern, middle, and western regions of China; an explicit impact on the performance in the western region, which lags behind only one period; and no significant lag effect of ETR on IFDI in developed, moderately developed, and underdeveloped regions. On the basis of this evaluation, the conclusion could be achieved that that ETR has a significant effect on IFDI, though there may be differences in the direction and value of the impact. The highlight of this research is to detect the impact of ETR on IFDI by taking China as a case, and achieved that there exist sub-national differences, including the geographical and development-level differences.

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“…The mechanism for trading carbon permits has emerged as a significant component of the financial landscape, not only aimed at mitigating greenhouse gas emissions but also playing a crucial role in promoting the growth of a low-carbon economy (Chen et al 2023). Electricity-generating plants and other carbon-intensive establishments were allowed to trade carbon permits within the European Union.…”

Section: Introductionmentioning

confidence: 99%

“…Our research paper added to the body of existing literature in the following ways: Firstly, this research article is pioneering in its exploration of the short and long-term co-integrating influence of the European carbon emission trading market (EU-ETS) and the CBOE oil price volatility index (OVZ) on the returns of the European financial market for Belgium, Finland, France, Germany, Ireland, Italy, Netherlands, Spain, Denmark, and the entire Eurozone. Notably, the majority of the work that has already been written focuses on examining how the Chinese carbon emission pricing system affects Chinese companies' financial performance (Zhang and Han 2022;Yu et al 2022;Chen et al 2023;Yin et al 2019), whereas Laskar et al (2022) have delved into the carbon-financial market nexus within the Indian economic context. However, the phenomenon of reverse causality captured the interest of Hong et al (2017), prompting an investigation into how the carbon emission trading mechanism responded to fluctuations in financial market returns.…”

Section: Introductionmentioning

confidence: 99%

Modeling the Nexus between European Carbon Emission Trading and Financial Market Returns: Practical Implications for Carbon Risk Reduction and Hedging

Tabash,

Al-Absy,

Hannoon

2024

JRFM

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The carbon–financial nexus helps firms evaluate susceptibility to carbon risk more effectively. This is the first research article to model the short- and long-run co-integrating association between European financial markets, the CBOE oil price volatility index (OVZ) and the European carbon emission trading system (EU-ETS) by using the daily returns from 1 October 2013 to 1 October 2023. We utilize co-integration test followed by the ARDL framework with an error correction mechanism (ECM). Moreover, we utilize the DCC-GARCH-t copula framework to estimate the hedge ratio and to select an optimal portfolio weight for carbon risk hedging. Overall, the findings suggested that EU-ETS (OVZ) has a consistent positive (negative) short-term influence on all the equity returns of Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Spain and the stock indices of the whole Eurozone. However, in the long term, EU-ETS has a positive (negative) effect on the stock returns of France and the Eurozone (Belgium and Spain). Belgian and Spanish companies could implement long-term carbon reduction policies. Belgian and Spanish firms should focus on the utilization of green energy resources and the internalization of carbon emission-free mechanical processes as this may offer a safeguard against the additional pressure arising from escalating carbon prices. Finally, an optimal portfolio weight selection strategy based upon the DCC-GARCH-t copula approach aims for higher hedging effectiveness (HE) than the hedge ratio strategy when adopting short-term positions in Italian and Danish equity markets to reduce the risk of long-term EU-ETS volatility.

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Dynamic lead–lag relationship between Chinese carbon emission trading and stock markets under exogenous shocks

Cited by 21 publications

References 36 publications

Examining the Spillover Effects of Renewable Energy Policies on China’s Traditional Energy Industries and Stock Markets

Examining the Spillover Effects of Renewable Energy Policies on China’s Traditional Energy Industries and Stock Markets

Empirical Analysis of Export Tax Rebate on Inwards Foreign Direct Investment in China

Modeling the Nexus between European Carbon Emission Trading and Financial Market Returns: Practical Implications for Carbon Risk Reduction and Hedging

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