Volatility transmission and hedging strategies across green and conventional stocks in global markets
研究了美国、欧洲和中国市场中绿色股票与常规股票之间的波动率传导，并评估了对冲策略的有效性，发现美国市场是主要波动传递者，中国绿色股票市场是净接收者。
To secure financing for climate initiatives, it is crucial to minimize the risk associated with green investments and attract investors committed to a robust, sustainable, low-carbon economy. Motivated by this need, this study investigates the volatility transmission between green and conventional stocks in the US, Europe, and China, and evaluates the effectiveness of hedging strategies for green investments. The period from June 1, 2016, to December 31, 2023, was selected to capture significant events impacting global markets, such as environmental regulations, the COVID-19 pandemic, and the Russia-Ukraine war, providing a comprehensive view of market dynamics under various conditions. We adopted the Diebold and Yilmaz (2014) approach using a TVP-VAR model to analyze market connectedness. Additionally, we utilize multivariate portfolio techniques to assess the effectiveness of hedging strategies. Our findings reveal that the US market is the primary transmitter of volatility, while the Chinese green stock market acts as a net receiver. This indicates substantial benefits from employing risk hedging and portfolio diversification strategies. The study underscores the importance of understanding the interconnected dynamics of stock markets for global investors and policymakers. By comprehending these relationships, investors can better manage risks and make informed decisions, while policymakers can develop strategies to support stable and resilient financial systems that foster sustainable investment. • Dynamic of green-conventional stock interdependence for climate finance. • Examine green-conventional equities volatility across the US, Europe, and China. • Innovative modeling by advanced TVP-VAR model for nuanced market insights. • Evaluating green investment in a hedging strategy for risk reduction. • Guide investors, and policymakers in climate-resilient portfolio strategy.