Abstract
In its efforts to achieve carbon peak and carbon neutrality, China has focused on new energy as a
key driver, with significant implications for China’s new energy and stock markets. However, few
studies have examined the relationship between the two markets. Based on multivariate generalized
autoregressive conditional heteroskedasticity models, we investigate the volatility spillovers
and dynamic correlations between China’s new energy and stock markets using daily data
from 2009 to 2023. And we also explore how these dimensions changed during the financial crisis
in 2015 and the COVID-19 period. Our findings indicate that there are bidirectional volatility
spillovers and asymmetric effects between these markets, suggesting that risks can accumulate
and negative shocks may have greater impacts than positive ones. These findings are still robust
after changing the distribution of the error term and excluding the impact of COVID-19. Significantly,
volatility spillovers between markets increased and asymmetric effects disappeared
during the two events due to the extreme turbulence in the stock market. Additionally, we find
that the two markets exhibit high interdependence, implying the existence of risk synergy effects
and limited possibilities for portfolio diversification. Finally, our analysis of the marginal expected
shortfall indicates that losses in China’s new energy market increased during the financial
crisis in 2015, implying that this strategic market is more exposed to the negative shocks of the
stock market. These results are valuable to policymakers, investors, and companies involved in
China’s new energy market.
Li, G.; Shen, Z.Y.; Song, M.; Wei, W. 2024. Exploring the interconnectedness of China’s new energy and stock markets: A study on volatility spillovers and dynamic correlations. International review of economics and finance : Elsevier. ISSN 1059-0560. 89, p. 471–484. DOI: 10.1016/j.iref.2023.10.030. [Scopus; Science Citation Index Expanded (Web of Science)].